Do Workers in Africa Get a Wage Premium if Employed in Firms Owned by Foreigners?

Do firms owned by foreigners pay higher wages than locally ownedfirms for apparently equivalent workers? Do such benefits accrueto all or only certain types of workers? This paper uses dataon individual wages in manufacturing industry for five Africancountries in the early 1990s to address these questions. Wepresent two main findings. First, foreign ownership is associatedwith a 20–40% increase in individual wages (conditionalon age, tenure and education) on average. This is halved to8–23% if we take into account the fact that foreign-ownedfirms are larger and locate in high-wage sectors and regions.Secondly, there is a tendency in some countries for more skilledworkers (using occupation and education categories) to benefitmore from foreign ownership than less skilled workers and thisconclusion holds after accounting for the size distributionof foreign firms. We discuss, but cannot directly test, theplausibility of two explanations for these findings: (i) foreign-ownedfirms employ technologies that are more skill-biased than technologiesin local firms and (ii) skilled workers in foreign firms aremore effective in rent-sharing than other workers. We contendthat these explanations may not be mutually exclusive and, hence,cannot be empirically distinguished.