, Volume 143, Issue 3, pp 464-482

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

Rent the article at a discount

Rent now

* Final gross prices may vary according to local VAT.

Get Access

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.

JEL no.

F23, J24