Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 674: Is There Really a Foreign Ownership Wage Premium? Evidence from Matched Employer-Employee Data

Fredrik Heyman (), Patrik Gustavsson Tingvall () and Fredrik Sjöholm ()
Additional contact information
Fredrik Heyman: Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Patrik Gustavsson Tingvall: Stockholm School of Economics, Postal: P.O. Box 6501, SE-113 83 Stockholm, Sweden
Fredrik Sjöholm: Stockholm School of Economics, Postal: P.O. Box 6501, SE-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 14, 2006

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