Labor Conflict and Foreign Investments: An Analysis of FDI in India

16 Pages Posted: 22 Oct 2007

See all articles by Nidhiya Menon

Nidhiya Menon

Brandeis University - International Business School

Paroma Sanyal

Brandeis University - Department of Economics

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Abstract

This paper analyzes patterns of foreign direct investment in India. We investigate how labor conflict, credit constraints, and indicators of a state's economic health influence location decisions of foreign firms. We account for the possible endogeneity of labor conflict variables in modeling the location decisions of foreign firms. This is accomplished by using a state-specific fixed effects framework that captures the presence of unobservables, which may influence investment decisions and labor unrest simultaneously. Results indicate that labor unrest is endogenous across the states of India, and has a strong negative impact on foreign investment.

Suggested Citation

Menon, Nidhiya and Sanyal, Paroma, Labor Conflict and Foreign Investments: An Analysis of FDI in India. Review of Development Economics, Vol. 11, Issue 4, pp. 629-644, November 2007. Available at SSRN: https://ssrn.com/abstract=1023236 or http://dx.doi.org/10.1111/j.1467-9361.2007.00423.x

Nidhiya Menon (Contact Author)

Brandeis University - International Business School ( email )

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Paroma Sanyal

Brandeis University - Department of Economics ( email )

Waltham, MA 02454
United States

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