Working Paper: CEPR ID: DP6171
Authors: Holger Grg; Eric Strobl; Frank Walsh
Abstract: While foreign-owned firms have consistently been found to pay higher wages than domestic firms to what appear to be equally productive workers, the causes of this remain unresolved. In a two-period bargaining framework we show that if training is more productive and specific in foreign firms, foreign firm workers will have a steeper wage profile and thus acquire a premium over time. Using a rich employer-employee matched data set we verify that the foreign wage premium is only acquired by workers over time spent in the firm and only by those that receive on the job training, thus providing empirical support for a firm specific human capital acquisition explanation.
Keywords: foreign firms; on-the-job training; wages
JEL Codes: F23; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| on-the-job training (M53) | wage growth in foreign firms (J39) |
| foreign ownership (F23) | wage growth for trained workers (J39) |
| foreign firms (F23) | higher wages than domestic firms (J31) |
| on-the-job training in foreign firms (M53) | steeper wage profile (J31) |
| time spent in firm (M51) | foreign wage premium (J31) |