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

Corvinus University of Budapest; Magyar Nemzeti Bank

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
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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

Corvinus University of Budapest ( email )

Hungary

Magyar Nemzeti Bank ( email )

Szabadsag ter 8-9
Budapest, H-1850
Hungary

Gabor Antal

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

Hungary

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