Scandinavian Working Papers in Economics
Working Paper Series,
Research Institute of Industrial Economics
No 1457: Importing Automation and Wage Inequality through Foreign Acquisitions
Malin Gardberg (), Fredrik Heyman () and Joacim Tåg ()
Additional contact information
Malin Gardberg: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Fredrik Heyman: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Joacim Tåg: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
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: Acquisitions; AI; Automation; Inequality; Robots; Technology; Trade; Mergers and Acquisitions; Multinational firms; Wages
Language: English
50 pages, April 5, 2023
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