Foreign Takeovers and Wages: Theory and Evidence from Hungary

47 Pages Posted: 17 Jan 2006

See all articles by Sandor Csengödi

Sandor Csengödi

Government of Hungary - National Development Office

Dieter M. Urban

Johannes Gutenberg University of Mainz - Institute for International Economic Theory; CESifo (Center for Economic Studies and Ifo Institute)

Rolf Jungnickel

Hamburg Institute of International Economics

Date Written: December 2005

Abstract

This study discriminates FDI technology spillover from learning effects. Whenever learning takes time, our model predicts that foreign investors deduct the economic value of learning from wages of inexperienced workers and add it to experienced ones to prevent them from moving to local competitors. Hence, the national wage bill is unaffected by foreign takeovers. In contrast to learning, technology spillover effects occur whenever a worker with MNE experience contributes more to local firms' than to MNEs' productivity. In this case, experienced MNE workers are hired by local firms and the host country obtains a welfare gain. We investigate empirically wages, productivity, and worker turnover during the course of foreign takeovers on employee-employer matched data of Hungary and find evidence consistent with learning, but not with FDI technology spillovers.

Keywords: FDI, foreign takeover, cross-border M&A, wage regression, employeeemployer

JEL Classification: F2, J3

Suggested Citation

Csengödi, Sandor and Urban, Dieter M. and Jungnickel, Rolf, Foreign Takeovers and Wages: Theory and Evidence from Hungary (December 2005). HWWA Discussion Paper No. 337, Available at SSRN: https://ssrn.com/abstract=875526 or http://dx.doi.org/10.2139/ssrn.875526

Sandor Csengödi

Government of Hungary - National Development Office ( email )

Bozsonyi ut 56
Budapest, 1133
Hungary

Dieter M. Urban (Contact Author)

Johannes Gutenberg University of Mainz - Institute for International Economic Theory ( email )

D 55099 Mainz
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Rolf Jungnickel

Hamburg Institute of International Economics ( email )

Neuer Jungfernstieg 21
D-20347 Hamburg
Germany

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