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

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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Correspondence to Eric Strobl.

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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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Keywords

  • On-the-job training
  • foreign-owned firms
  • wages