FDI and Wages: Evidence from Firm-Level and Linked Employer-Employee Data in Hungary, 1986-2008

47 Pages Posted: 5 Jan 2013

See all articles by John S. Earle

John S. Earle

George Mason University - Schar School of Policy and Government; IZA Institute of Labor Economics

Almos Telegdy

Hungarian Academy of Sciences (HAS) - Research Centre for Economic and Regional Studies (HAS); Central European University

Gabor Antal

Hungarian Academy of Sciences (HAS) - Labor Economics

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Abstract

We estimate the wage effects of foreign direct investment (FDI) with universal firm-level and linked employer-employee panel data containing 4,926 foreign acquisitions in Hungary. Matching on pre-acquisition data and controlling for fixed effects for firms and detailed worker groups, we find 12-28 percent effects on average wages. The wage effect mostly reverses for 983 foreign acquisitions later divested to domestic owners. We find positive effects for all worker types, occupations, and wage quantiles. The evidence implies little role for either measurement problems or residual selection, but suggests a strong cross-firm association of FDI wage premia with similar differentials in productivity.

Keywords: foreign acquisitions, FDI, earnings, wage differentials, productivity, difference-in-differences matching, employer effects, Hungary

JEL Classification: F23, F66, J31

Suggested Citation

Earle, John S. and Telegdy, Almos and Antal, Gabor, FDI and Wages: Evidence from Firm-Level and Linked Employer-Employee Data in Hungary, 1986-2008. IZA Discussion Paper No. 7095. Available at SSRN: https://ssrn.com/abstract=2196760

John S. Earle (Contact Author)

George Mason University - Schar School of Policy and Government ( email )

3351 Fairfax Drive
MS 3B1
Arlington, VA 22201
United States
703-993-8023 (Phone)

HOME PAGE: http://earle.gmu.edu

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Almos Telegdy

Hungarian Academy of Sciences (HAS) - Research Centre for Economic and Regional Studies (HAS) ( email )

7621 Pécs, Papnovelde u. 22
Budapest, H-1112
Hungary

Central European University ( email )

Nador utca 9
Budapest, H-1051
Hungary
+36 1 327 3233 (Phone)
+36 1 327 3232 (Fax)

Gabor Antal

Hungarian Academy of Sciences (HAS) - Labor Economics ( email )

Hungary

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