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Which Boats are lifted by a Foreign Tide? Direct and Indirect Wage Effects of Foreign Ownership

4th June 2019
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Authors: Sourafel Girma, Holger Görg and Erasmus Kersting (Journal of International Business Studies, 2019, Vol. 50(6), 923-947)

The attraction of foreign direct investment (FDI) is considered to be of particular importance for emerging economies because it represents a channel through which international convergence in standards of living may be achieved. One important effect of FDI is its impact on wages, both within the targeted firm (direct) and the local firms within the same geographic region and sector (indirect). In this paper we investigate the question whether multinational enterprises (MNEs) raise or lower wages directly and indirectly, both theoretically and empirically. Importantly, the magnitude of these changes may depend on how many firms in the sector are already foreign-owned. Generally, the effect of MNEs on wages has not been studied as intensively in the international business (IB) literature as other aspects of FDI, and ours is the first article to specifically investigate the moderating effect of variation in foreign employment shares across industry-province cells (clusters). Using Chinese data on 146,199 firms we estimate the direct wage effect of foreign ownership to be positive and to increase with the employment share of foreign owned firms. We also find that the indirect effect on domestic wages varies with the foreign share and may even turn negative.

 

Keywords: foreign direct investment, wage effects, spillovers

JEL: F12, F16, F23, F61

 

DOI: https://doi.org/10.1057/s41267-019-00248-2

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Pre-Publication Version_Girma et al_Wage Effects

Involved Team members

  • Prof. Holger Görg, Ph.D.

Involved External Research Fellows

  • Prof. Sourafel Girma Ph.D.

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Project 1
Cross-cultural differences in the perception of corporate social responsibility and consumer social responsibility along global supply chains
Project 1
Experimental studies of moral responsibility in global supply chains
Project 1
Modelling economic and social dimensions of global supply chains
Project 1
Global supply chains, environmental regulation and green innovation

Other Projects

Cross-cultural differences in the perception of corporate social responsibility and consumer social responsibility along global supply chains Experimental studies of moral responsibility in global supply chains
Modelling economic and social dimensions of global supply chains Global supply chains, environmental regulation and green innovation Further KCG Projects

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