revised version published as 'Evaluating the foreign ownership wage premium using a difference-in-differences matching approach' in: Journal of International Economics, 2007, 72(1), 97-112
This paper investigates the effects of the takeover of a domestic establishment by foreign
owners on the domestic target’s development of wages for skilled and unskilled workers. We
pay particular attention to identifying the causal effect, using a propensity score matching
approach combined with a difference-in-differences estimator, and differences in post
acquisition effects depending on the nationality of the acquirer. Our results suggest that there
is substantial heterogeneity in the post-acquisition wage effect depending on the nationality
of the foreign acquirer, the industry in which the firms operate and the skill group of workers.
In particular, we find that skilled workers, on average, experience a post acquisition increase
in the wage rate following an acquisition by a US firm, while no such effect is discernible
following acquisitions by EU or firms of other nationalities. For unskilled workers, there are
positive post acquisition wage effects from take-overs by EU firms in the electronics industry
and US firms in the food industry.
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