FDI and the Skill Premium: Evidence from Emerging Economies

33 Pages Posted: 15 Oct 2018 Last revised: 16 Oct 2018

See all articles by Marcio Jose Vargas Da Cruz

Marcio Jose Vargas Da Cruz

World Bank Group

Gaurav Nayyar

University of Oxford

Gerhard Toews

New Economic School (NES)

Pierre-Louis Vezina

King’s College London

Date Written: October 12, 2018

Abstract

Foreign direct investment may play an important role in transferring technologies from high-income to emerging economies, which can lead to uneven effects on the wages of skilled and unskilled workers. This paper combines project-level data on greenfield foreign direct investment with household surveys to estimate the effects of foreign direct investment on the wage skill premium across sectors and regions in seven emerging economies (Brazil, Colombia, Ethiopia, Mexico, the Philippines, South Africa, and Vietnam). The results suggest that foreign direct investment is associated with a higher probability of employment and higher wages for unskilled workers, relative to skilled workers, in six of the seven countries analyzed in this paper. Moreover, the effects of foreign direct investment on wages are relatively larger for unskilled women.

Keywords: International Trade and Trade Rules, Skills Development and Labor Force Training, Gender and Development

Suggested Citation

Vargas Da Cruz, Marcio Jose and Nayyar, Gaurav and Toews, Gerhard and Vezina, Pierre-Louis, FDI and the Skill Premium: Evidence from Emerging Economies (October 12, 2018). World Bank Policy Research Working Paper No. 8613, Available at SSRN: https://ssrn.com/abstract=3265576

Marcio Jose Vargas Da Cruz (Contact Author)

World Bank Group

1818 H St NW
Washington, DC 20433
United States

Gaurav Nayyar

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Gerhard Toews

New Economic School (NES) ( email )

100A Novaya Street
Moscow, Skolkovo 143026
Russia

Pierre-Louis Vezina

King’s College London ( email )

Strand
London, England WC2R 2LS
United Kingdom

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