Does Foreign Direct Investment Affect Wage Inequality? An Empirical Investigation

IZA Discussion Paper No. 2336

University of Nottingham Research Paper No. 2006/29

IIIS Discussion Paper No. 186

28 Pages Posted: 3 Oct 2006

See all articles by Paolo Figini

Paolo Figini

University of Bologna - Department of Economics; University of Bologna - CAST - Centre for Advanced Studies in Tourism

Holger Görg

University of Kiel; Kiel Institute for the World Economy

Multiple version iconThere are 2 versions of this paper

Date Written: November 2006

Abstract

We use a panel of more than 100 countries for the period 1980 to 2002 to analyse the relationship between inward foreign direct investment (FDI) and wage inequality. We particularly check whether this relationship is non-linear, in line with a theoretical discussion. We find that the effect of FDI differs according to the level of development: we depict two different patterns, one for OECD (developed) and one for non-OECD (developing) countries. Results suggest the presence of a non linear effect in developing countries; wage inequality increases with FDI inward stock but this effect diminishes with further increases in FDI. For developed countries, wage inequality decreases with FDI inward stock and there is no robust evidence to show that this effect is non-linear.

Keywords: Foreign Direct Investment, Wage Inequality, Multinational Firms

JEL Classification: O1, F2, J3

Suggested Citation

Figini, Paolo and Gorg, Holger, Does Foreign Direct Investment Affect Wage Inequality? An Empirical Investigation (November 2006). IZA Discussion Paper No. 2336, University of Nottingham Research Paper No. 2006/29, IIIS Discussion Paper No. 186, Available at SSRN: https://ssrn.com/abstract=934507 or http://dx.doi.org/10.2139/ssrn.934507

Paolo Figini (Contact Author)

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, 40126
Italy

HOME PAGE: http://www2.dse.unibo.it/dsa/profile.php?id=33

University of Bologna - CAST - Centre for Advanced Studies in Tourism ( email )

Via Angherà 22
Rimini, RN 47922
Italy

Holger Gorg

University of Kiel ( email )

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

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