CEU Electronic Theses and Dissertations, 2012
| Author | Antal, Gabor |
|---|---|
| Title | WAGES AND FOREIGN DIRECT INVESTMENT IN HUNGARY |
| Summary | The thesis consists of three self-standing papers organized into three chapters. The abstract of each chapter follows below. Chapter 1: Dispersion of Wages in Transition: Trends and Reasons of Changes in Wage Inequality in the Hungarian Business Sector, 1986-2008 Exploiting a large linked employer-employee dataset of 2.8 million observations on workers employed by 37,000 enterprises, I study earnings inequality of full-time employees in the Hungarian business sector. I find that the dispersion of real monthly earnings – as measured by several inequality indices – increased rapidly from 1989 to 2000, then declined significantly until 2002, started to rise again shortly, but returned to a decreasing path in 2005. At its peak level, wage inequality was the highest among OECD countries. Within-firm variance constantly declined throughout the period while all changes in total wage dispersion are reflected in between-firm variance. This is to some extent explained by differences in within-cohort variances of new entrant firms. Half of the decline between 2000 and 2002 is explained by a 57 per cent increase in the real value of the minimum wage. Between 2002 and 2008, when measures on working hours are available, I do not find any evidence of working hours explaining trends in inequality of monthly earnings. Results do not change significantly when controlling for the changing size criteria of sample inclusion for companies across years. The contribution of changes in skill composition is around 30%, mainly due to the increasing dominance of high-skilled workers in terms of growing employment shares, group-level inequality and mean wages. Yet, a large part of inequality changes remains unexplained by observable factors. Chapter 2: The Effect of Foreign Acquisitions on Wages: Evidence from Hungarian Firm and Linked Employer-Employee Data (joint with John Earle and Álmos Telegdy) This paper estimates the effects of foreign acquisitions on average and worker-specific wages in previously domestically owned firms in Hungary. The analysis is carried out both at the firm level using universal data for all Hungarian corporations and at the worker level using linked employer-employee data from a very large survey. The panel is much longer (23 years) than in previous studies and the data contain a large number of foreign acquisitions with information both before and after the change in ownership. Our empirical methods include matching on multiple years of pre-acquisition data and fixed effects for firms, detailed worker groups, and individuals (where workers can be linked inside firms). We also exploit reversals in ownership status: acquisition followed later by divestment. While point estimates are sensitive to specification, we find in all cases positive effects of FDI on average wages, and even on wages of all worker types. The only significantly higher foreign premium is associated with university education. We consider possible explanations for the findings, including productivity and rent-sharing, as well as selection and measurement. The evidence suggests that the foreign premium is strongly associated with a similar differential in productivity. Chapter 3: Foreign Ownership and the Distribution of Wages in Hungary, 1992-2000: An Unconditional Quantile Decomposition Approach With the help of a rich linked dataset on both firms and workers of the Hungarian corporate sector, this paper analyzes how changes in foreign direct investment contributed to changes in the unconditional wage distribution at different quantiles between 1992 and 2000. After transition, Hungary experienced an extraordinary amount of continuous FDI inflow during the nineties, while earnings inequality increased by close to seventy percent in just ten years, compared to its 1989 level. The role of FDI in inequality changes is partialed out by a detailed decomposition of log wage changes based on a recently developed method by Firpo et al. (2009) that extends the standard Oaxaca-Blinder decomposition to unconditional quantiles of the distribution. I find that at every point in time, the share of employees of foreign-owned firms has a positive and significant wage level effect at every unconditional quantile, and these effects are inequality enhancing for men while they have an ambiguous effect on the unconditional dispersion for women. FDI contributed strongly to wage changes at every part of the distribution through an increased foreign employment share in the economy, but not through changes in the returns to being employed by foreign-owned firms. However, it played only a moderate role in the growth of inequality. |
| Supervisor | Earle, John S. |
| Department | Economics PhD |
| Full text | https://www.etd.ceu.edu/2012/antalg.pdf |
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