The takeover and selection effects of foreign-owned establishments: an analysis using linked employer–employee data

Abstract

We provide the first estimates of the effect of foreign ownership on wages in Germany, controlling for the observed and unobserved characteristics of workers and plants. We also test whether the wage gains from joining a foreign-owned firm are subsequently lost when leaving that firm, and we examine whether wage gains vary across the sample. We find large selection effects in terms of worker and plant components of wages. Once the selection effect is taken into account, the takeover effect is small and in some cases insignificantly different from zero.