Foreign Ownership, Employment and Wages in Brazil: Evidence from Acquisitions, Divestments and Job Movers


How much do developing countries benefit from foreign investment? We contribute to this question by comparing the employment and wage practices of foreign and domestic firms in Brazil, using detailed matched firm-worker panel data. In order to control for unobserved worker differences, we examine both foreign acquisitions and divestments and worker mobility, including the joint estimation of firm and worker fixed effects. We find that changes in ownership do not tend to affect wages significantly, a result that holds both at the worker- and firm-levels. However, divestments are related to large job cuts, unlike acquisitions. On the other hand, movers from foreign to domestic firms take larger wage cuts than movers from domestic to foreign firms. Moreover, on average, the fixed effects of foreign firms are considerably larger than those of domestic firms, while worker selection effects are relatively small.

Share and Cite:

Martins, P. and Esteves, L. (2015) Foreign Ownership, Employment and Wages in Brazil: Evidence from Acquisitions, Divestments and Job Movers. Technology and Investment, 6, 22-45. doi: 10.4236/ti.2015.61003.

Conflicts of Interest

The authors declare no conflicts of interest.


[1] Aitken, B., Harrison, A. and Lipsey, R. (1996) Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela, and the United States. Journal of International Economics, 40, 345-371.
[2] Velde, D. and Morrisey, O. (2003) Do Workers in Africa Get a Wage Premium If Employed in Firms Owned by Foreigners? Journal of African Economies, 12, 41-73.
[3] Lipsey, R. and Sjoholm, F. (2004) Foreign Direct Investment, Education, and Wages in Indonesian Manufacturing. Journal of Development Economics, 73, 415-422.
[4] Abowd, J., Kramarz, F. and Margolis, D. (1999) High Wage Workers and High Wage Firms. Econometrica, 67, 251-333.
[5] Conyon, M., Girma, S., Thompsom, S. and Wright, P. (2002) The Productivity and Wage Effects of Foreign Acquisition in the United Kingdom. Journal of Industrial Economics, 50, 85-102.
[6] Lipsey, R. and Sjoholm, F. (2006) Foreign Firms and Indonesian Manufacturing Wages: An Analysis with Panel Data. Economic Development and Cultural Change, 55, 201-221.
[7] Martins, P.S. (2004) Do Foreign Firms Really Pay Higher Wages? Evidence from Different Estimators. IZA Discussion Paper, Bonn, 1388.
[8] Heyman, F., Sjoholm, F. and Tingvall, P.G. (2007) Is There Really a Foreign Ownership Wage Premium? Evidence from Matched Employer-Employee Data. Journal of International Economics, 73, 355-376.
[9] Andrews, M., Bellman, L., Schank, T. and Upward, R. (2007) The Takeover and Selection Effects of Foreign Ownership in Germany: An Analysis Using Linked Worker-Firm Data. GEP University of Nottingham Research Paper, Nottingham.
[10] Earle, J. and Telegdy, A. (2007) Ownership and Wages: Estimating Public-Private and Foreign-Domestic Differentials Using LEED from Hungary, 1986-2003. NBER Working Paper, Cambridge, MA, 12997.
[11] Martins, P.S. (2006) Inter-Firm Worker Mobility, Wages, and Foreign Direct Investment Spillovers. Mimeo, Queen Mary University of London.
[12] Poole, J. (2007) Multinational Spillovers through Worker Turnover. Mimeo, University of California, Santa Cruz.
[13] Balsvik, R. (2008) Is Mobility of Labour a Channel for Spillovers from Multinationals to Local Domestic Firms? Mimeo, Norwegian School of Economics and Business Administration, Bergen.
[14] Abowd, J., Creecy, R. and Kramarz, F. (2002) Computing Person and Firm Effects Using Linked Longitudinal Employer-Employee Data. Mimeo, Cornell University Working Paper, Ithaca.
[15] Martins, P.S. and Esteves, L.A. (2006) Is There Rent Sharing in Developing Countries? Matched-Panel Evidence from Brazil. IZA Discussion Paper, Bonn, 2317.
[16] DeNegri, F. (2003) Desempenho comercial das empresas estrangeiras no Brasil na d′ecada de 90 [The Performance of Foreign Firms in Brazil in the 1990s]. Mimeo, Universidade Estadual de Campinas, Campinas/SP.
[17] Rosenbaum, P. and Rubin, D. (1983) The Central Role of the Propensity Score in Observational Studies for Causal Effects. Biometrika, 70, 41-55.
[18] KPMG (2001) Mergers and Acquisitions in Brazil: An Analysis of the 1990s. KPMG Corporate Finance, Sao Paulo.
[19] Davis, S.J., Haltiwanger, J.C. and Schuh, S. (1996) Job Creation and Destruction. MIT Press, Cambridge.
[20] Burgess, S., Lane, J. and Stevens, D. (2000) Job Flows, Worker Flows, and Churning. Journal of Labor Economics, 18, 473-502.
[21] Ouazad, A. (2006) A2REG: Stata Module. Mimeo, Cornell University, Ithaca.
[22] Martins, P.S. (2008) Dispersion in Wage Premiums and Firm Performance. Economics Letters, 101, 63-65.
[23] Martins, P.S. (2008) Foreign Ownership and Wages: Evidence from Worker Mobility. Mimeo, Queen Mary University of London.
[24] Muendler, M.A. (2003) Foreign Direct Investment by Sector of Industry, Brazil 1980-2000. Mimeo, University of California, San Diego.
[25] Ashenfelter, O. (1978) Estimating the Effect of Training Programs on Earnings. Review of Economics and Statistics, 60, 47-57.

Copyright © 2023 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.