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CRIEFF Discussion Papers list Abstract
We contribute to the literature on Foreign Direct Investment and labour markets
by examining wage differentials between domestic and foreign firms, drawing
on a large Portuguese matched employer-employee panel. Using OLS, the foreign-firm
premium is large and significantly positive but falls substantially when firm
and worker controls are added. Moreover, the premium also does not vary monotonically
with foriegn control, increases along the wage distribution and is generally
insignificant when using propensity score matching (PSM). Finally, using differnces-in
differences (DID), we find lower wage growth for workers in domestic firms that
are acquired by foreign investors, a result that holds when combining DID and
PSM. Overall, our evidence suggests that the commonly-documented OLS premium
cannot be interpreted as a casual impact.
Key Words
FDI, Wages, Matched Employer-Employee Data, Propensity Score Matching, Portugal
JEL Classifications
C23, F23, J31
Pedro S. Martins
University of St Andrews & University
of Warwick
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CRIEFF Discussion Papers list