TY  - JOUR
AU  - Malchow-Møller,Nikolaj
AU  - Markusen,James R.
AU  - Schjerning,Bertel
TI  - Foreign Firms, Domestic Wages
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13001
PY  - 2007
Y2  - March 2007
UR  - http://www.nber.org/papers/w13001
L1  - http://www.nber.org/papers/w13001.pdf
N1  - Author contact info:
Nikolaj Malchow-Moller
Centre for Economic and Business Research
Porcelaenshaven 24B,
Copenhagen Business School
DK-2000 Frederiksberg Denmark
E-Mail: malchow@cebr.dk

James R. Markusen
Department of Economics
University of Colorado
Boulder, CO 80309-0256
Tel: 303/492-0748
Fax: 303/492-8960
E-Mail: james.markusen@colorado.edu

Bertel Schjerning
Centre for Economic and Business Research
Porcelaenshaven 24B,
Copenhagen Business School
DK-2000 Frederiksberg Denmark
E-Mail: bsc.cebr@cbs.dk
AB  - Foreign-owned firms are often hypothesized to generate productivity "spillovers" to the host country, but both theoretical micro-foundations and empirical evidence for this are limited.  We develop a heterogeneous-firm model in which ex-ante identical workers learn from their employers in proportion to the firm?s productivity. Foreign-owned firms have, on average, higher productivity in equilibrium due to entry costs, which means that low-productivity foreign firms cannot enter.  Foreign firms have higher wage growth and, with some exceptions, pay higher average wages, but not when compared to similarly large domestic firms.  The empirical implications of the model are tested on matched employer-employee data from Denmark. Consistent with the theory, we find considerable evidence of higher wages and wage growth in large and/or foreign-owned firms. These effects survive controlling for individual characteristics, but, as expected, are reduced significantly when controlling for unobservable firm heterogeneity. Furthermore, acquired skills in foreign-owned and large firms appear to be transferable to both subsequent wage work and self-employment.
ER  -