Firms, International Competition, and the Labor Market

Abstract: Essay 1: We propose a model of cross-border acquisitions in which multinational enterprises (MNEs) and private equity-firms (PE) compete over domestic assets. MNEs' advantage lies in firm-specific synergies, whereas PE-firms are good at restructuring. Prevailing interest rates do not work in favor of PE-firms, but a lower risk premium and better financial market development do. Stronger firm-specific synergies favor MNEs. Performing a welfare analysis, we show that a policy of restricting PE-firms can be counterproductive. Essay 2: To understand how share of cross-border leveraged buyouts (LBOs) in all cross-border Mergers and Acquisitions (M&As) varies across countries and time, I use a model of cross-border M&As similar to Norbäck and Persson (2009) and Norbäck et al. (2013) where the share of LBOs are negatively related to transaction costs, international market integration, and property rights. I find evidence for these predictions in a comprehensive dataset covering all majority-owned cross-border M&As in the world.Essay 3: This paper studies the effect of increased competition from low wage countries on the earnings gap between skilled and unskilled workers using Swedish matched worker-firm micro data. Treating Chinese accession into WTO as an exogenous shock, the paper shows that higher Chinese import penetration increases earnings for high-skilled workers, and creates a significantly larger skill premium, contributing to the increase in wage inequality. One percentage points increase in Chinese import penetration results in about 1 percent higher wages for skilled workers, and the rise in Chinese imports explains about 10 percent of the overall rise in skilled wages.Essay 4: This paper studies the changes in labor allocations across firms and industries in response to recent changes in information and communication technologies (ICT) adoption and increase in Chinese import penetration using a detailed matched worker-firm micro data from Swedish manufacturing. High ICT adoption industries show increased assortative matching patterns: those affected by high change in import competition experience skill upgrading in high end firms, and those that are relatively shielded from import competition see an increase in low skilled workers in lower end firms. Low ICT adoption does not exhibit these patterns. We provide a tentative model to explain the main changes observed in the data.