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Does Foreign Direct Investment Affect Wage Inequality? An Empirical Investigation
Author(s) -
Figini Paolo,
Go¨rg Holger
Publication year - 2011
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/j.1467-9701.2011.01397.x
Subject(s) - foreign direct investment , economics , wage inequality , stock (firearms) , wage , inequality , panel data , developing country , labour economics , economic inequality , demographic economics , macroeconomics , econometrics , economic growth , mechanical engineering , mathematical analysis , mathematics , engineering
We use a panel of more than 100 countries for the period 1980–2002 to analyse the relationship between inward foreign direct investment (FDI) and wage inequality. We particularly check whether this relationship is nonlinear, in line with a theoretical discussion. We find that the effect of FDI differs according to the level of development: we depict two different patterns, one for OECD (developed) and one for non‐OECD (developing) countries. Results suggest the presence of a nonlinear effect in developing countries: wage inequality increases with FDI inward stock, with such effect diminishing with further increases in FDI. For developed countries, wage inequality decreases with FDI inward stock, and there is no robust evidence to show that this effect is nonlinear.