Cross-Border Merger and Acquisition Activity and Wage Dynamics

Using detailed administrative data that link French firms and workers over the years 2002 to 2007, the authors document declines in worker-level wages ahead of the time their employer is acquired by a foreign firm that are more than offset by gains in wages that emerge after cross-border acquisition. Specifically, relative wages fall by an estimated 7.5% in the years just before foreign acquisition, and they rise by approximately 12.5% in the years afterward. Changes in workers’ earnings are evident in both wages and in-kind payments given to workers. Moreover, the authors provide theoretical foundations for the conditional mean independence assumption that underlies commonly applied empirical techniques.