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

25 Pages Posted: 18 Jun 2004

See all articles by Nidhiya Menon

Nidhiya Menon

Brandeis University - International Business School

Paroma Sanyal

Brandeis University - Department of Economics

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Date Written: June 11, 2004

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 highly endogenous across the states of India, and has a strong negative impact on foreign investment.

Keywords: Foreign Direct Investment, Labor Disputes, India

JEL Classification: L2, L5, O2

Suggested Citation

Menon, Nidhiya and Sanyal, Paroma, Labor Conflict and Foreign Investments: An Analysis of FDI in India (June 11, 2004). Available at SSRN: https://ssrn.com/abstract=556710 or http://dx.doi.org/10.2139/ssrn.556710

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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