Three Essays in Applied International and Labour Economics

Chapter 1: Going Multinational: What are the effects on home market performance? A number of recent studies find evidence for the existence of a persistent performance gap between multinational enterprises (MNE) and their domestic competitors. This chapter investigates to what extent MNEs have superior performance characteristics, both prior to and after they have switched from national to multinational activities. In the first case results are quite clear: Future multinationals outperform domestic firms. When comparing ex-post performance of firms an endogenous treatment model is applied to account for selectivity issues. The results suggest that after switching, both productivity and wage growth are higher for newly founded MNEs than for national firms. Employment growth is superior before switching but does not exhibit significantly higher ex-post growth rates. Moreover, capital intensities at multinationals evolve towards the use of capital. Chapter 2: The Impact of FDI on the Skill Structure in German Manufacturing This chapter tests whether foreign direct investment (FDI) of German manufacturing multinationals (MNE) has raised domestic skill intensity between 1996 and 2001. Using a sample of 1,557 firms, the results show that foreign activities of German manufacturing MNEs carry higher average wages on the home market. I interpret this as evidence indicating that part of the skill upgrading in German manufacturing is associated with the rising job export to foreign locations. Other things equal, an increase in overall affiliate employment relative to domestic employment by 10 percentage points raises skill intensity at the parent firm by 0.1\% to 0.3\%. When distinguishing between different host regions, I find investment in industrialised countries consistent with the horizontal FDI motive, whereas investment in developing countries is driven by vertical production strategies. In the case of transition countries results are inconclusive. Chapter 3: Health and Wages - Panel data estimates considering selection and endogeneity This paper investigates the effects of health on wages by controlling for a number of problems: first, the unobservable genetic endowment may cause an omitted variable bias; second, using a self-reported health variable could induce measurement error; third, the issue of reverse causality arises; and fourth, panel attrition driven by the endogenous decision to participate in the labour market may result in inconsistent estimation. By using recently developed methods, I control for all of the above issues in one framework. The results show that good health raises wages for both women and men. I find the health variable to suffer from measurement error. For men, applying OLS or 2SLS, instead of methods accounting for selection and individual heterogeneity, causes an upward bias in the health coefficient. Selection tests indicate panel attrition to generate biased estimates in the male sample, while for females no selection correction is required.