Foreign Ownership Wage Premia in Emerging Economies: Evidence from Czech Republic

In this paper we examine the relationship between wages, labour productivity and ownership using a linked employer-employee dataset covering a large fraction of the Czech labour market in 2006. We distinguish between different origins of ownership and study wage and productivity differences. The raw wage differential between foreign and domestically owned firms is about 24 percent. The empirical analysis is carried out on both firm- and individual-level data. A key finding is that industry, region, and notably human capital explain only a small part of the foreign-domestic ownership wage differential. Both white and blue collar workers as well as skilled and unskilled employees obtain a foreign ownership wage premium. Foreign ownership premia are more prevalent in older and less technologically advanced firms. Joint estimation of productivity and wage equations show that, controlling for human capital, the difference in productivity is about twice as large as the wage differential. The results indicate that the international firms share their rents with their employees