Should Trade Unions Welcome Foreign Investors? Evidence from Danish Matched Employer-Employee Data

The paper presents first empirical evidence on the effect of foreign ownership on the union wage premium. Using matched employer-employee data for Denmark, the positive effect of plant-level unionisation on wages is found to vanish in foreign-owned firm. While the estimation establishes a positive wage effect of foreign ownership of between two and four per cent for workers employed in non-unionised firms, the foreign ownership premium is close to zero for workers in highly unionised enterprises. This result might help to understand why trade unions frequently resist foreign take-overs even though the existence of a positive foreign ownership wage premium is widely acknowledged in the literature.