We contribute to the literature on Foreign Direct Investment and labour markets by examining
wage differentials between domestic and foreign firms, drawing on a large Portuguese
matched employer-employee panel. Using OLS, the foreign-firm premium is large and
significantly positive but falls substantially when firm and worker controls are added.
Moreover, the premium also does not vary monotonically with foreign control, it increases
along the wage distribution and it is generally insignificant when using propensity score
matching. Finally, using differences-in-differences, we find lower wage growth for workers in
domestic firms that are acquired by foreign investors, a result that holds when combining
differences-in-differences and propensity score matching. Overall, our evidence suggests
that the commonly-documented OLS premium cannot be interpreted as a causal impact.
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