Foreign-Affiliate Activity and U.S. Skill Upgrading

37 Pages Posted: 10 Jul 1999 Last revised: 12 Oct 2010

See all articles by Bruce A. Blonigen

Bruce A. Blonigen

University of Oregon - Department of Economics; National Bureau of Economic Research (NBER)

Matthew J. Slaughter

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Date Written: March 1999

Abstract

There has been little analysis of the impact of inward foreign direct investment (FDI) on U.S. wage inequality, even though the presence of foreign-owned affiliates in the United States has arguably grown more rapidly in significance for the U.S. economy than trade flows. Using data across U.S. manufacturing from 1977 to 1994, this paper tests whether inward flows of FDI contributed to within-industry shifts in U.S. relative labor demand toward more-skilled labor. We generally find that inward FDI has not contributed to U.S. within-industry skill upgrading; in fact, the wave of Japanese greenfield investments in the 1980s was significantly correlated with lower, not higher, relative demand for skilled labor. This finding is consistent with recent models of multinational enterprises in which foreign affiliates focus on activities less skilled-labor intensive than the activities of their parent firms. It also suggests that if inward FDI brought new technologies into the United States, the induced technological change was not biased towards skilled labor.

Suggested Citation

Blonigen, Bruce A. and Slaughter, Matthew J., Foreign-Affiliate Activity and U.S. Skill Upgrading (March 1999). NBER Working Paper No. w7040. Available at SSRN: https://ssrn.com/abstract=156788

Bruce A. Blonigen (Contact Author)

University of Oregon - Department of Economics ( email )

1285 University of Oregon
Eugene, OR 97403
United States
541-346-4680 (Phone)
541-346-1243 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Matthew J. Slaughter

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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