Discussion Paper

No. 2012-6 | January 16, 2012
The Wage Premium of Globalization: Evidence from European Mergers and Acquisitions


We provide evidence on the impact of globalization on labor market outcomes analyzing pay differences between foreign-acquired and domestically-owned firms. For this purpose, we use firm level data from 16 European countries over the time period 1999–2006. Applying propensity score matching techniques we estimate positive wage premia of cross-boarder merger and acquisitions (M&As), suggesting that foreign acquired firms exhibit higher short-run (post-acquisition) wages than their domestic counterparts. The observed wage disparities are most pronounced for low paying firms (with average wages below the median). Finally, we find systematic wage premia in Western European countries, but not so in Eastern Europe.

Paper submitted to the special issue
Responding to the Labour Market Challenges of Globalisation

JEL Classification

J31 C21 G34 F15

Cite As

Harald Oberhofer, Matthias Stöckl, and Hannes Winner (2012). The Wage Premium of Globalization: Evidence from European Mergers and Acquisitions. Economics Discussion Papers, No 2012-6, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2012-6


Comments and Questions

Anonymous - Referee Report 1
January 25, 2012 - 17:07

See attached file

Anonymous - Invited Reader Comment
February 13, 2012 - 14:26

See attached file

Anonymous - Referee Report 2
February 22, 2012 - 08:25

See attached file

Hannes Winner - Reply to Reports and Comment
March 05, 2012 - 09:04

First of all, we would like to thank two anonymous referees and the invited reader for their thoughtful and very constructive comments. We think that the suggestions help us to further increase the quality of the paper and we are optimistic that we can address all of them accurately. ...[more]

... In our point of view, all comments put forward be the referees an the invited reader center around three major issues, namely (i) the framing of the paper, (ii) the lack of comparison to previous literature and (iii) - broadly speaking - the empirical analysis. Hereafter, we would like to briefly explain how we would tackle these three topics in a revised version of this manuscript.

With regard to the framing of the paper, we totally agree that mergers and acquisitions (M&As) are only one important aspect of the globalization. In a revised version we would therefore change the title of the paper to “The Wage Premium of Foreign Ownership: Evidence from European Mergers and Acquisitions” and would re-frame our introduction and conclusion sections accordingly.

As mentioned in the paper, the major difference to previous contributions (e.g., Almeida 2007 and Girma and Goerg 2007) is that we employ data for a cross section of 16 European countries including some transition economies. This, in turn, allows to investigate whether results based on single-country evidence can be generalized for a larger set of European countries and also enables us to investigate whether wage effects of M&As differ between industrialized and transition economies. However, we agree with the referees that the paper can do a better job in drawing comparisons to the previous literature. Thereby, we will put the focus on potential differences between transition economies and industrialized countries because deviating results for these country groups imply that the generalizability of single-country evidence might be limited.

Finally, the referees provide some clear suggestions for improving the quality of the empirical analysis. In order to account for these suggestions we would modify the empirical part of the paper in several aspects. First, we would extend the discussion regarding our data base and, thereby, provide more detailed information on the sample composition as well as sample selection issues. Consecutively, we would modify the selection equation as suggested by referee 1 and additionally include pre-merger wages and firm size squared. Thereby, we would also report balancing property tests and information regarding common support. Moreover, we would clarify the obtained wage growth effects in our discussions.

With regard to the outcome variables of interest, the revised version of the manuscript would contain a number of robustness checks. Thereby, we would follow the suggestion of referee 1 and investigate wage effects later than only after one single post-M&A. In similar vein, we would address an issue put forward by the invited reader, who argues that extensive and intensive margin effects of M&As might differ. Consequently, we would estimate wage growth differences between newly acquired firms and firms which are already subsidiaries of MNEs.

Referee 2 raises an interesting question regarding the driving forces behind the obtained wage effects. Unfortunately, the data at hand do not include worker-specific information which would allow to see whether M&As induce changes in the skill level of the affected employees. However, as suggested by the referee, we are able to (at least descriptively) investigate the impact of M&As on (firm) productivity, profits, capital intensity etc.. This would allow us to `speculate' about potential driving forces for the positive wage effects of M&As.

Harald Oberhofer, Matthias Stöckl, and Hannes Winner - Revised Version
May 14, 2012 - 13:52

See attached file

Harald Oberhofer, Matthias Stöckl, and Hannes Winner - Reply to Referee Report 1
May 14, 2012 - 13:54

See attached file

Harald Oberhofer, Matthias Stöckl, and Hannes Winner - Reply to Invited Reader Comment
May 14, 2012 - 13:55

See attached file

Harald Oberhofer, Matthias Stöckl, and Hannes Winner - Reply to Referee Report 2
May 14, 2012 - 13:56

See attached file

Sebastian Braun - Decision Letter on Version 1
May 30, 2012 - 11:08

See attached file

Sebastian Braun - Decision Letter on Version 2
May 30, 2012 - 11:15

See attached file