Review of World Economics

, Volume 143, Issue 3, pp 464–482

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

Article

DOI: 10.1007/s10290-007-0117-9

Cite this article as:
Görg, H., Strobl, E. & Walsh, F. Rev World Econ (2007) 143: 464. doi:10.1007/s10290-007-0117-9

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.

Keywords

On-the-job training foreign-owned firms wages 

Copyright information

© Kiel Institute 2007

Authors and Affiliations

  1. 1.University of NottinghamNottinghamUnited Kingdom
  2. 2.Department of EconomicsEcole Polytechnique ParisPalaiseauFrance
  3. 3.University College DublinDublinIreland