The Effects of Foreign Owned Firms on the Labor Market

Rita Almeida ()

No 785, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: 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.

Keywords: acquisitions; employment and wage structure; foreign direct investment (search for similar items in EconPapers)
JEL-codes: C31 F23 J31 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2003-05
New Economics Papers: this item is included in nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

Published - published in: Journal of International Economics, 2007, 72 (1), 75-96

Downloads: (external link)
https://docs.iza.org/dp785.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp785

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().