Working Paper: CEPR ID: DP9863
Authors: Joseph A. Clougherty; Klaus Peter Gugler; Lars Sørgard; Florian Szucs
Abstract: Two literatures exist concerning cross-border merger activity?s impact on domestic wages: one focusing on spillover-effects; the other focusing on bargaining-effects. Motivated by scarce theoretical scholarship spanning these literatures, we nest both mechanisms in a single conceptual framework. Considering the separate phenomena of inward and outward cross-border merger activity, we predict that ?bargaining? (?spillover?) effects are relatively more dominant under high (low) unionization rates and under high (low) degrees of relatedness. Employing US firm-level panel data on wages combined with industry-level data on unionization and merger activity (covering 1989-2001), we find support for our propositions as inward and outward cross-border merger activity generate positive spillovers to wages, but are more likely to generate firm-level wage decreases when unionization rates are high and when cross-border merger activity is best characterized as related.
Keywords: Bargaining; Cross-Border Mergers; FDI; Spillovers; Wages
JEL Codes: F23; F66; J30; L21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Inward and outward cross-border mergers (F23) | Positive spillover effects on domestic firm wages (J39) |
| Higher levels of cross-border merger activity (F23) | Wage increases in domestic firms (J31) |
| High unionization rates (J51) | Wage decreases in domestic firms due to cross-border mergers (F66) |
| Unionization and cross-border merger activity (J50) | Lower wages for domestic firms (F66) |
| Relatedness of merging firms' products (L15) | Magnitude of wage changes (J31) |
| Cross-border mergers (F23) | Complex net effect on domestic wages influenced by spillover and bargaining effects (F66) |