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Why Do Foreign-Owned Firms Pay More? The Role of On-the-Job Training

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  • Walsh, Frank
  • Strobl, Eric
  • Görg, Holger

Abstract

While foreign-owned firms have consistently been found to pay higher wages than domestic firms to what appear to be equally productive workers, the causes of this remain unresolved. In a two-period bargaining framework we show that if training is more productive and specific in foreign firms, foreign firm workers will have a steeper wage profile and thus acquire a premium over time. Using a rich employer-employee matched data set we verify that the foreign wage premium is only acquired by workers over time spent in the firm and only by those that receive on the job training, thus providing empirical support for a firm specific human capital acquisition explanation.

Suggested Citation

  • Walsh, Frank & Strobl, Eric & Görg, Holger, 2007. "Why Do Foreign-Owned Firms Pay More? The Role of On-the-Job Training," CEPR Discussion Papers 6171, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:6171
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    More about this item

    Keywords

    On-the-job training; Foreign firms; Wages;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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