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

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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.

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Author information

Authors and Affiliations

  1. University of Nottingham, Nottingham, United Kingdom

    Holger Görg

  2. Department of Economics, Ecole Polytechnique Paris, 91128, Palaiseau, France

    Eric Strobl

  3. University College Dublin, Dublin, Ireland

    Frank Walsh

Authors
  1. Holger Görg
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  2. Eric Strobl
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  3. Frank Walsh
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Corresponding author

Correspondence to Eric Strobl.

Additional information

JEL no.

F23, J24

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Görg, H., Strobl, E. & Walsh, F. Why Do Foreign-Owned Firms Pay More? The Role of On-the-Job Training. Rev World Econ 143, 464–482 (2007). https://doi.org/10.1007/s10290-007-0117-9

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  • DOI: https://doi.org/10.1007/s10290-007-0117-9

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