Importing Automation and Wage Inequality Through Foreign Acquisitions

51 Pages Posted: 19 Apr 2023

See all articles by Malin Gardberg

Malin Gardberg

Research Institute of Industrial Economics (IFN)

Fredrik Heyman

Research Institute of Industrial Economics (IFN)

Joacim Tåg

Research Institute of Industrial Economics (IFN); Hanken School of Economics

Date Written: April 6, 2023

Abstract

Is technology or trade driving increases in wage inequality? We propose that technology interacts with trade in the form of foreign direct investments to widen domestic wage inequality. We show that foreign acquisitions of domestic firms disproportionately affect wages for workers who perform tasks sensitive to the technology specialization (software or robotics) of the acquiring firm. Based on Swedish matched employer-employee data covering two decades and staggered difference-in-differences methods we find wages to decline by up to 5.2% annually over an eight-year post period. Our results suggest that a trade policy aimed at attracting foreign companies with high technological capabilities can help countries advance technologically, but this may come at the cost of increased domestic wage inequality.

Keywords: Foreign Direct Investments, Automation, Inequality, AI, Robots, Technology, Trade, Mergers and Acquisitions, Multinational firms, Wages.

JEL Classification: F23, G34, J30, R10.

Suggested Citation

Gardberg, Malin and Heyman, Fredrik and Tåg, Joacim, Importing Automation and Wage Inequality Through Foreign Acquisitions (April 6, 2023). IFN Working Paper No. 1457, Available at SSRN: https://ssrn.com/abstract=4412153 or http://dx.doi.org/10.2139/ssrn.4412153

Malin Gardberg

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Fredrik Heyman

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

HOME PAGE: http://https://www.ifn.se/eng/people/research-faculty/fredrikh_1

Joacim Tåg (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Hanken School of Economics ( email )

PB 287
Helsinki, Vaasa 65101
Finland

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