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Title: Cross-border mergers and domestic-firm wages: Integrating ?spillover effects? and ?bargaining effects?

Author(s): Joseph A. Clougherty, Klaus Peter Gugler, Lars S�rgard and Florian Sz�cs

Publication Date: March 2014

Keyword(s): bargaining, Cross-Border Mergers, FDI, spillovers and wages

Programme Area(s): Industrial Organization, International Trade and Regional Economics and Labour Economics

Abstract: Two literatures exist concerning cross-border merger activity?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 ?bargaining? (?spillover?) 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.

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Bibliographic Reference

Clougherty, J, Gugler, K, S�rgard, L and Sz�cs, F. 2014. 'Cross-border mergers and domestic-firm wages: Integrating ?spillover effects? and ?bargaining effects?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9863