Scandinavian Working Papers in Economics

EIJS Working Paper Series,
Stockholm School of Economics, The European Institute of Japanese Studies

No 230: IS THERE REALLY A FOREIGN OWNERSHIP WAGE PREMIUM? EVIDENCE FROM MATCHED EMPLOYER-EMPLOYEE DATA

Fredrik Heyman (), Fredrik Sjöholm () and Patrik Gustavsson Tingvall ()
Additional contact information
Fredrik Heyman: The Research Institute of Industrial Research, Postal: The Research Institute of Industrial Research, P.O. Box 55665, 102 15 Stockholm, Sweden
Fredrik Sjöholm: European Institute of Japanese Studies, Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden
Patrik Gustavsson Tingvall: European Institute of Japanese Studies, Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden

Abstract: Numerous studies on firm-level data have reported higher average wages in foreign-owned firms than in domestically-owned firms. This, however, does not necessarily imply that the individual worker’s wage increase with foreign ownership. Using detailed matched employer-employee data on the entire Swedish private sector, we examine the effect of foreign ownership on individual wages, controlling for individual and firm heterogeneity as well as for possible selection bias in foreign acquisitions. We distinguish between foreign greenfields and takeovers and compare foreign owned firms with both domestic multinationals and local firms. Our results show a considerably smaller wage premium in foreign owned firms than what has been found in studies conducted at a more aggregate level. Moreover, foreign takeovers of Swedish firms tend to have no or even a negative effect on wages.

Keywords: FDI; Foreign ownership; Wages; Matched Employer-Employee data; Propensity score matching

JEL-codes: C23; F23; J31

36 pages, November 1, 2006

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