DP9863 Cross-border mergers and domestic-firm wages: Integrating ‘spillover effects’ and ‘bargaining effects’
|Author(s):||Joseph A. Clougherty, Klaus Peter Gugler, Lars SÃ¸rgard, Florian SzÃ¼cs|
|Publication Date:||March 2014|
|Keyword(s):||bargaining, Cross-Border Mergers, FDI, spillovers, wages|
|JEL(s):||F23, F66, J30, L21|
|Programme Areas:||Labour Economics, Industrial Organization, International Trade and Regional Economics|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=9863|
Two literatures exist concerning cross-border merger activityâ€™s impact on domestic wages: one focusing on spillover-effects; the other focusing on bargaining-effects. Motivated by scarce theoretical scholarship spanning these literatures, we nest both mechanisms in a single conceptual framework. Considering the separate phenomena of inward and outward cross-border merger activity, we predict that â€˜bargainingâ€™ (â€˜spilloverâ€™) effects are relatively more dominant under high (low) unionization rates and under high (low) degrees of relatedness. Employing US firm-level panel data on wages combined with industry-level data on unionization and merger activity (covering 1989-2001), we find support for our propositions as inward and outward cross-border merger activity generate positive spillovers to wages, but are more likely to generate firm-level wage decreases when unionization rates are high and when cross-border merger activity is best characterized as related.