DP5788 Evaluating the Foreign Ownership Wage Premium Using a Difference-in-Differences Matching Approach

Author(s): Sourafel Girma , Holger Görg

Publication Date: August 2006

Keyword(s): multinationals , acquisitions , wages , difference-in-differences , matching estimator

JEL(s): F23 , J31

Programme Areas: International Trade and Regional Economics

Link to this Page: www.cepr.org/pubs/dps/DP5788.asp.asp

This paper seeks to identify the causal effect of foreign acquisitions on wages of skilled and unskilled workers, using difference-in-differences propensity score matching estimators. Our results suggest that there is substantial heterogeneity in the post-acquisition wage effect depending on the nationality of the foreign acquirer and the skill group of workers. We find sizable post acquisition wage effects on skilled and unskilled wages following an acquisition by a US firm. No such impacts result from acquisitions by EU multinationals. Also we discern some positive wage effects for unskilled workers resulting from acquisitions by multinationals from the rest of the world.