Abstract
We compare the wages of skilled workers in multinational enterprises (MNEs) versus domestic firms, the earnings of domestic firm workers with past, future and no MNE experience, and estimate how the presence of ex-MNE peers affects the wages of domestic firm employees. The analysis relies on monthly panel data covering half of the Hungarian population and their employers in 2003–2011. We identify the returns to MNE experience from changes of ownership, wages paid by new firms of different ownership, and the movement of workers between enterprises. We find high contemporaneous and lagged returns to MNE experience and significant spillover effects. Foreign acquisition has a moderate wage impact, but there is a wide gap between new MNEs and domestic firms. The findings, taken together, suggest that MNE employees accumulate partly transferable knowledge, valued in the high-wage segment of the local economy that is connected with the MNEs via worker turnover.
Highlights
Heyman et al 2007; Andrews et al 2007; Malchow-While policymakers in developing countries are often Moller et al 2007)
They lose a part of their wage advantage after leaving the foreign-owned sector but, even so, they earn more than their domestic sector colleagues with no multinational enterprises (MNEs) experience
Their presence in domestic firms exerts a positive effect on the wages of their peers, who had no contact with foreign-owned firms or had no recent outside work experience at all
Summary
While policymakers in developing countries are often Moller et al 2007). An adverse competition effect often criticized for ‘selling out’ the country to foreigners, FDI offsets the positive direct impact of FDI on productivcan bring valuable knowledge to a less developed ity and wages even in relatively undeveloped economies economy, spreading through labor mobility channels. (Aitken and Harrison 1999; Djankov and Hoekman 2000; Undeniably, corporate revenues can find their way back Konings 2001; Barry et al 2005). These companies paid significantly higher wages than ‘always domestic’ firms (when they were domestic) and significantly lower wages than ‘always foreign’ companies (when they were foreign-owned): this is how the 2FE model arrives at a close-to-zero estimate of the ownership-specific wage gap These firms’ experience can hardly predict how big MNEs like Mercedes-Benz or IBM would pay their employees in the unlikely event of takeover by a local business person. The OLS estimate of Martins (2004) for Portugal is higher (11 percent), but he finds that the MNE wage premium virtually disappears after controlling for worker selection These figures compare to 32 percent (pooled OLS for all skill levels) and 13 percent (after adding worker fixed effects) in our sample. A more detailed analysis of the sources of the gaps in Germany, Portugal, the UK, and Brazil (OECD 2008b) finds that takeovers’ marginal effect on wages falls short of 3 percent in all of these countries. Results from Hungary point to similar patterns. Csengődi et al (2008) use a different data set from ours (the Wage Survey, a repeated cross-section LEED which allows the linking of firms but not workers) and find that after adding firm fixed effects, the MNE wage premium falls to a mere 3 percent as it does in our case.9 Earle et al (2017) use the same data
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