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FDI, foreign takeover, cross-border M&A, Mincer wage regression, employee-employer matched data, nearest-neighbor matching,

This study discriminates FDI technology spillover from learning effects. Whenever learning takes time, our model predicts that foreign investors deduct the economic value of learning from wages of inexperienced workers and add it to experienced ones to prevent them from moving to local competitors. Hence, the national wage bill is unaffected by foreign takeovers. In contrast to learning, technology spillover effects occur whenever a worker with MNE experience contributes more to local firms' than to MNEs' productivity. In this case, experienced MNE workers are hired by local firms and the host country obtains a welfare gain. We investigate empirically wages, productivity, and worker turnover during the course of foreign takeovers on employee-employer matched data of Hungary and find evidence consistent with learning, but not with FDI technology spillovers. JEL classification: F2, J3Key-Words: FDI, foreign takeover, cross-border M&A, wage regression, employee-employer matched data; propensity score matching; FDI technology spillover;Addresses: Dieter Urban, Institute for International Economic Theory, FB03, Johannes GutenbergUniversity of Mainz, 55099 Mainz, rolf.jungnickel@hwwa.de. 1 We acknowledge financial support from the EU Commission, fifth framework program -project FLOWENLA. We thank Laszlo Halpern and Janos Köllő for their support and lots of information relevant to this research project. We also thank the Hungarian Academy of Sciences for providing research facilities and the dataset. We thank for comments of Laszlo Goerke, Martin Kolmar, Pehr-Johan Norbäck and participants of workshops at HWWA, CEPS, and at the ETSG-meeting in Nottingham. The usual disclaimer applies. 1 Foreign Takeovers and Wages: Theory and Evidence from HungaryJuly 27, 2005 AbstractThis study discriminates FDI technology spillover from learning effects. Whenever learning takes time, our model predicts that foreign investors deduct the economic value of learning from wages of inexperienced workers and add it to experienced ones to prevent them from moving to local competitors. Hence, the national wage bill is unaffected by foreign takeovers. In contrast to learning, technology spillover effects occur whenever a worker with MNE experience contributes more to local firms' than to MNEs' productivity. In this case, experienced MNE workers are hired by local firms and the host country obtains a welfare gain. We investigate empirically wages, productivity, and worker turnover during the course of foreign takeovers on employee-employer matched data of Hungary and find evidence consistent with learning, but not with FDI technology spillovers.

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