published in: Journal of International Economics, 2007, 72 (1), 75-96
Cross sectional evidence shows that foreign firms have a more educated workforce and pay
higher wages than domestic firms. These results do not necessarily imply that foreign direct
investment translates into higher demand for educated workers or higher wages, however,
since foreign investment may be guided by unobservable firm-characteristics correlated with
the demand for educated workers or wages. Using firm-level panel data for Portugal, I seek
to isolate the effect of foreign direct investment on the demand for educated workers and
wages by observing labor demand and wages of different education groups before and after
the foreign acquisition. I find that foreigners 'cherry pick' domestic firms to be acquired,
choosing those firms with a more educated workforce. Moreover, these firms are already very
similar to the group of existing foreign firms and, following the foreign acquisition, there are
no significant changes in the workforce educational composition. There is evidence that
average wages increase following the foreign acquisition but changes are smaller than in
cross sectional estimates.
We use cookies to provide you with an optimal website experience. This includes cookies that are necessary for the operation of the site as well as cookies that are only used for anonymous statistical purposes, for comfort settings or to display personalized content. You can decide for yourself which categories you want to allow. Please note that based on your settings, you may not be able to use all of the site's functions.
Cookie settings
These necessary cookies are required to activate the core functionality of the website. An opt-out from these technologies is not available.
In order to further improve our offer and our website, we collect anonymous data for statistics and analyses. With the help of these cookies we can, for example, determine the number of visitors and the effect of certain pages on our website and optimize our content.