Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/20685
Authors: 
Martins, Pedro Silva
Year of Publication: 
2004
Series/Report no.: 
IZA Discussion paper series 1388
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 foreign control, it increases along the wage distribution and it is generally insignificant when using propensity score matching. Finally, using differences-in-differences, we find lower wage growth for workers in domestic firms that are acquired by foreign investors, a result that holds when combining differences-in-differences and propensity score matching. Overall, our evidence suggests that the commonly-documented OLS premium cannot be interpreted as a causal impact.
Subjects: 
FDI
wages
matched employer-employee data
propensity score matching
Portugal
JEL: 
C23
J31
F23
Document Type: 
Working Paper

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