Reassessing the foreign ownership wage premium in Germany

Abstract

This paper evaluates the effect of foreign takeover on wages of workers in German establishments, using rich linked employer–employee data from 2003 to 2014. To identify a causal effect of foreign takeover, we combine propensity‐score matching with a difference‐in‐difference estimator. We find that a takeover by a foreign investor leads to a wage premium of 4.0 log points in the year after ownership change, which further increases to 6.3 log points 3 years after acquisition. The wage premium is largest for high‐skilled workers, which is consistent with three theoretical arguments, namely rent appropriation by managers, technology protection and training on new technology. We also show that the wage premium does not pick up an exporter effect due to a platform investment of the foreign owner, that it takes about 4 years before it fully develops, that it does not vanish after foreign divestment and that the wage increase is specific to foreign acquisition instead of ownership change per se.

Foreign- and domestic firm ownership and its impact on wages. Evidence from Poland

“…Girma and Görg (2007), studying the United Kingdom, find that foreign-owned firms pay higher wages than comparable domestic firms, and the magnitude of these wage premia differs for skilled and unskilled workers. Egger et al (2020) provide evidence for a foreign ownership wage premium in Germany. They also show that this wage premium differs by skill group.…”

Why Do People Oppose Foreign Acquisitions? Evidence from Japanese Individual-Level Data

“…Although rising productivity is likely to result in higher wages, many studies have suggested disparities in the impact on wages (Hijzen et al, 2013;Setzler and Tintelnot, 2021). Using German data, Egger et al (2020) revealed that the wage premiums of foreign affiliates are concentrated in high-skilled workers, suggesting that the wage gap between high-and low-skilled workers will widen. Considering the possibility of such disparities, the impact of inward FDI on wages and employment would vary depending on the individual's skills, and as a result, individuals' preferences for inward FDI may differ.…”

Foreign acquisition and firm performance in sub‐Saharan Africa: Empirical evidence from Ghana

“…They employ a DID method implemented in a regression framework (Conyon et al, 2002, p. 7). Elsewhere, Egger et al (2020) estimate the foreignownership wage premium in Germany, using a longitudinal linked employer-employee data. Their study findings indicate positive effects of foreign acquisition on wages.…”