fdi and income inequality evidence from a panel of u s states this study employs state level panel data to explore the relationship between inward foreign direct investment fdi and income inequality in the united states using panel cointegration techniques that allow for cross sectional heterogeneity cross sectional dependence and endogenous regressors we find that the short run effects of fdi on income inequality are insignificant or weakly significant and negative in the long run however fdi exerts a significant and robust negative effect on income inequality in the united states this result for the united states as a whole does not imply that fdi narrows income gaps in the long run in each individual state there is considerable heterogeneity in the long run effects of fdi on income inequality across states with some states 21 out of 48 cases exhibiting a positive relationship between fdi in income inequality

spoilt for choice multinational corporations and the geography of international production this paper questions the view that foreign direct investment fdi is producing an integrated world production and trading system although multinational firms have a greater choice of locations than in the past their recent investments abroad have taken place within a regional rather than global framework the upsurge of fdi flows from north to south has been attracted by just a handful of fast growing developing countries the paper disputes the claim that the road to development is for poor countries to attract fdi on the scale observed in such countries as malaysia this claim involves a fallacy of composition while fdi can make a valuable contribution most countries will have to rely mainly on their own resources and indigenous producers the paper argues that current proposals for a multilateral agreement on investment neglect both the regional aspects of integration and the need of poorer countries to promote their domestic supply capabilities conflicts of interest which are ignored in the current rhetoric suggest the continuing relevance of a strategic policy approach to international production copyright 1998 by oxford university press

knowledge proximity and r d exodus abstract we explore not only how technological leaders and laggards react to agglomeration but within an agglomeration we look at how the relative presence of other leaders laggards and foreign firms affects these firms existing literature argues that technological leaders experience net knowledge outflows and are therefore losers in agglomerations however we do not know if they avoid locations with laggards more so than locations with leaders or vice versa thus we examine how the relative presence of each affects leaders location decisions for technologically lagging firms we argue they will prefer locations with leaders over locations with laggards we further posit that an increasing presence of foreign firms will have a particularly detrimental effect on technologically leading domestic firms as these lose out in the contest for talent contextualized in an emerging market with weak intellectual property rights protection we examine whether these concerns about knowledge spillovers and competition for talent prompt firms to close their r d facilities or remain open using 5798 observations of r d laboratories in india during 2003 2011 we find that while technologically leading firms are more likely to close their r d facilities as the presence of other domestic labs increases laggards are less likely to do so these findings suggest concerns over knowledge spillovers are present especially on the part of technologically leading firms moreover leaders are more concerned by the presence of other leaders technologically lagging firms by contrast are less likely to close r d facilities in the face of these concerns and will prefer staying near leaders over laggards finally we find evidence of foreign firms crowding out domestic technological leaders but not laggards in the competition for talent

foreign corporations and the culture of transparency evidence from russian administrative data abstract firms from developed countries carry a culture of transparency in business transactions that is opposite to the culture of hiding and insider dealing in developing and transition economies we employ russian administrative data on reported earnings and market values of cars to measure wage misreporting for individual employees of domestic firms in moscow we show that closer ties to multinationals lead to improved transparency of wage reporting in private russian companies employees located closest to movers from multinationals in the job quality space experience the largest gains in transparency we find a robust correlation between wage misreporting and accounting fraud

job queues discrimination and affirmative action james r fain if employers have different becker type discrimination coefficients for different demographic groups then the implementation of affirmative action may have a differential impact on those groups we estimate two vector autoregressive models of the us economy including the unemployment rates of four demographic groups we find that a job queue existed before the implementation of affirmative action and that affirmative action changed the ordering of the job queue in manner that had a negative impact on nonwhite males we find evidence that affirmative action may have increased the unemployment rate of nonwhite males by increasing their duration of unemployment jel j71 j78 j64 j68 i introduction the relative status of demographic groups in the labor force has been undergoing significant change since the early 1960s throughout this period white females and racial minorities have experienced changes not only relative to white males but also relative to one another one such change is exhibited in relative unemployment rates figure 1 shows differentials in the smoothed unemployment rates using a 12 x 2 centered moving average for white females nonwhite males and nonwhite females for the years 1959 83 one can easily see that the relative unemployment burdens have varied over time focusing first on the two lines that are positive over the entire range one may see that prior to the late 1960s the status of nonwhite individuals especially nonwhite males relative to white females was improving however beginning in the late 1960s this trend reversed the unemployment rate differential between nonwhite males and white females increased from a low of 1 03 in july 1969 to a high of 11 12 in march 1983 similarly after declining during the 1960s the unemployment rate differential between nonwhite females and white females increased from a low of 3 49 in october 1969 to a high of 9 16 in august 1983 these reversals in trend indicate the status of white females relative to both nonwhite males and nonwhite females began improving in the late 1960s figure 1 also shows the status of nonwhite females improved relative to that of nonwhite males during the same time period the unemployment rate differential between nonwhite males and nonwhite females increased from a low of 3 13 in february 1968 to a high of 2 38 in february 1983 these three unemployment rate differentials all declined in the 1960s a time of tremendous social change and strong economic growth but all of these trends reversed direction in the 20 month period from february 1968 to october 1969 after the trend reversal the status of white females improved relative to both nonwhite males and nonwhite females and the status of nonwhite females improved relative to that of nonwhite males to put it another way nonwhite males lost ground relative to both nonwhite females and white females our goal is to examine what role if any the implementation of affirmative action in 1968 had in reversing these trends other possible explanations of the above noted reversal in trends certainly exist but several factors point to affirmative action as a potential cause of these changes first the timing is correct the trends reversed in close proximity to the implementation of affirmative action second whatever caused these reversals affected all minority groups did so within a short 20 month time span and its impact was sustained over a number of years a new federal policy designed to change the way firms hire minorities should have exactly this type of effect finally as we will argue below imposing affirmative action on discriminating employers will not benefit all demographic groups equally discriminating employers will continue to discriminate though the pattern of discrimination may change many of the traditional explanations of changes in relative unemployment rates are unlikely candidates to explain these significant and sustained reversals of longstanding trends

privatization and globalization an empirical analysis abstract this paper examines the link between globalization measured by foreign direct investment fdi and foreign portfolio investment fpi and privatization of state owned enterprises in a multi country sample that focuses on developing countries we hypothesize that privatization has an effect on fdi fpi as the process of fostering private sector participation is often accompanied by liberalization reforms and by allocations of substantial shares of newly privatized firms to foreign investors similarly we expect fdi fpi to foster privatization efforts as new capital inflows technology and managerial skills that accompany fdi fpi make the environment more prone to competition providing governments with incentives to privatize inefficient firms that need to be turned around this relation is assessed in two ways first in a dynamic panel using a generalized method of moments approach and second through panel causality tests we find a bi directional positive relation between privatization proceeds and globalization particularly in the case of fdi

cross sectional estimation of fdi spillovers when fdi is endogenous ols and iv estimates for mexican manufacturing industries cross sectional estimates of foreign direct investment fdi spillovers are biased when the variable capturing the cross industry variation of foreign participation is endogenous to the estimated regression model in this article i introduce an original instrument for this problematic fdi variable capturing the general fdi intensity of manufacturing industries i use this instrument to estimate fdi externalities in a cross section of mexican manufacturing industries the main findings show that in contrast to the common criticism that ordinary least squares ols estimation produces an upward bias in the estimated fdi externality effect for the sample of mexican manufacturing industries ols estimation causes a downward bias controlling for the tendency among foreign manufacturing firms to gravitate towards low productivity industries the instrumental variable estimations provide robust evidence of significantly larger positive fdi spillover effects

foreign direct investment heterogeneous workers and employment security evidence from germany we analyze how foreign direct investment fdi affects employment security using administrative microdata for german employees measuring fdi intensity at the industry level enables us to take into account the sum of direct effects at multinationals as well as indirect effects of fdi throughout the affected industry we find that both inward and outward fdi significantly reduce employment security this is particularly the case for inward fdi coming from the western part of the european union as well as for outward fdi going to central and eastern europe the effects are sizeable for older and low skilled workers

foreign owned firms around the world a comparative analysis of wages and employment at the micro level abstract this paper provides the first microeconomic cross country analysis of the effects of foreign ownership on wages employment and worker turnover rates using firm level and linked worker firm data we apply a standardised methodology for three developed germany portugal uk and two emerging economies brazil indonesia we find that wage effects are larger in developing countries and that for each country the largest effect on wages comes from workers who move from domestic to foreign firms employment growth after foreign takeover is concentrated in high skill jobs in contrast to widespread fears there is no evidence that wage gains come at the expense of greater job insecurity separation rates actually fall slightly after takeover we conclude that the positive effect of foreign ownership on wages is not primarily driven by its impact on incumbent wages but by its impact on the creation of high wage jobs

unionised labour market and strategic production decision of a multinational i show that a foreign firm may sell the same product through both foreign direct investment fdi and export and this decision depends on the size of the product market it happens irrespective of whether the labour market in the domestic country or in the foreign country is unionised unlike the existing works focusing on risk diversification in presence of demand or cost uncertainty i explain the co existence of fdi and export in a world with certainty the endogenous determination of the wage rate plays an important role for my results my analysis shows the effects of the fixed cost of fdi and competition in the product market on the production strategy of the foreign firm

intra and inter industry externalities from foreign direct investment in the mexican manufacturing sector new evidence from mexican regions summary this paper presents new empirical evidence on externalities from foreign direct investment fdi in several mexican regions in the early 1990s the main findings are threefold first the presence of fdi creates negative externalities within industries and positive externalities between industries through backward linkages second fdi externalities are stimulated by large technological differences between fdi and mexican firms and by geographic concentration of industries third we identify a substantial level of regional heterogeneity of the externality impact of fdi in line with the notion that fdi may have contributed to processes of changing regional prosperity under trade liberalization the findings also imply that maquiladora firms in the border states are generating positive externalities

the effect of foreign direct investment on the urban wage in china an empirical examination how does foreign direct investment fdi affect the wage levels of cities in a host country this paper uses a panel dataset of chinese cities to examine the impact of inward fdi on the urban real wage the results suggest that the existence of fdi has a significant and positive effect on urban real wages and that this impact remains significant after controlling for other city characteristics cross city variation of fdi intensity is one important factor contributing to intercity wage inequality

fdi policies under shared factor markets abstract we examine the consequences of foreign direct investment fdi policies in a general equilibrium setting with several oligopolistic industries by shifting labor demand across countries fdi raises the wage in the host country and lowers the wage in the source country thereby raising profits of source country firms at the expense of host country firms the extent of cross ownership of firms the relative number of firms and the relative supply of skilled labor alter the impact of fdi policy on national welfare the tension between profits and wages determines whether the optimal policy is designed to encourage fdi

wages and foreign ownership a comparative study of mexico venezuela and the united states abstract this paper explores the relationship between wages and foreign investment in mexico venezuela and the united states despite very different economic conditions and levels of development we find one fact that is robust across all three countries higher levels of foreign investment are associated with higher wages however in mexico and venezuela foreign investment is associated with higher wages only for foreign owned firms there is no evidence of wage spillovers leading to higher wages for domestic firms the lack of spillovers in mexico and venezuela is consistent with significant wage differentials between foreign and domestic enterprises in the united states where the evidence suggests some wage spillovers from foreign to domestic enterprises wage differentials are smaller

the effect of foreign acquisition on employment and wages evidence from finnish establishments employee characteristics by skill groups makes it possible to disentangle the effect of foreign ownership on wages from its effects on the quality of the workforce furthermore this information allows us to examine the heterogeneity of the effect of foreign acquisition on wages and employment third the long timespan of our data thirteen years enables us to consider the effects of foreign acquisition in the long run hiring and firing costs may delay the effects of foreign acquisition by looking at the effects of acquisition in several periods after it has taken place these delays can be taken into account we believe finland to be an interesting case study for the effects of foreign ownership it is a typical example of a small open economy where foreign investment plays an important role furthermore our data cover the years 1988 2001 when the share of foreign direct investments rose rapidly in finland this increase is depicted in figure 1 and it partly reflects the worldwide trend in foreign direct investment but the years 1988 2001 were also characterized by two phenomena which undoubtedly led to the increase in the share of foreign owned firms first finland experienced a very severe recession in the early 1990s and the recovery from this crisis was associated with a rapid restructuring of the economy and a growth of new industries in particular the export oriented high tech sector 2 second finland joined the european union in 1995 which naturally removed a considerable number of barriers to foreign investment in the finnish economy the results derived by both matching and regression methods indicate that foreign acquisition has a positive effect on wages in all skill groups this wage increase is not immediate but occurs within one to three years after the acquisition the magnitude of this effect increases with the level of schooling of the workers the results indicate that there is a small decrease in the share of highly educated workers after foreign acquisition the decrease in the share of highly educated workers after acquisition also seems to hold for domestic acquisitions the paper is organized as follows the next section briefly describes the theoretical background for the analysis and reviews some previous empirical findings the third section describes the statistical framework and the fourth section presents the data sets the results are provided in the fifth section the last section concludes the paper

when and where does foreign direct investment generate positive spillovers a meta analysis local firms may attract productivity spillovers from foreign investors yet these vary with local firms awareness capability and motivation to react to foreign entry in consequence spillovers vary across countries at different levels of economic development we apply competitive dynamics theory to analyze these contextual moderators of spillovers and test hypotheses thus derived in a meta analysis of the empirical literature on spillovers our analysis suggests a curvilinear relationship between spillovers and the host country s level of development in terms of income institutional framework and human capital

wage and competition channels of foreign direct investment and new firm entry using a rich data set of the dutch manufacturing sector between 1995 and 2010 we investigate the effect of foreign direct investment fdi on domestic new firm entry the emerging empirical literature has focused on the direct relationship between fdi and entry but has not explored the mechanisms behind the observed effect drawing on a simultaneous equations model our analysis features both the direct effect of fdi as well as indirect effects through two channels industry competition and wages we estimate the parameters through 3sls and take into account the endogeneity of competition and wages with respect to entry our results show that there is a significant negative direct effect of fdi on entry at the same time fdi decreases competition and increases wage levels which then impact entry positively and negatively respectively the total effect of fdi is negative but small and virtually disappears after one year policy implications are discussed

unraveling the mne wage premium whereas ib has extensively studied mnes generic positive impact on host economies but rarely on employee wages economics research has only shown an overall mne wage premium we unravel this premium considering multiple levels of analysis and accounting for host country contextual contingencies to unveil mnes different positive or negative distributional effects using unique micro level data from over 40 000 employees in 13 countries we examine mnes distributional effects for employees gender experience and immigrant status the influence of host country property rights protection and labor regulation and interplays with region and industry effects mnes distributional effects show marked differences that largely depend on the host country context and that are positive for experienced and foreign born employees in developed countries but negative for females working in developing countries whereas in developed countries the gender wage gap is smaller in mnes than in domestic firms as hypothesized we find evidence of a larger wage gap in developing countries the analysis also reveals that the higher host countries level of property rights protection the lower the mne wage premium our study points at the need to reassess statements about the generic positive impact of mnes in host countries particularly in developing countries and discusses further research implications

multinational firms and technology transfer the authors construct an oligopoly model in which a multinational firm has a technology superior to those of local firms in the host country workers employed by the multinational acquire knowledge of the superior technology and can spread their knowledge to local firms by switching employers the multinational chooses to pay a wage premium to prevent local firms from hiring away its workers if the local firms are sufficiently disadvantaged or if there are enough local firms diffusion of the superior technology benefits local firms at the expense of workers whose wages suffer the host government might have an incentive to attract foreign direct investment even when technology transfer will not result because of the wage premium local employees of the multinational firm earn also foreign direct investment with technology transfer may reduce the total economic rent the host country earns

south south trade and skill premia contrary to the predictions of the 2 2 2 heckscher ohlin model empirical evidence shows that the skill premium increased in some developing countries and decreased in others after trade liberalisation this paper attempts to reconcile the empirical evidence with the theoretical predictions by introducing a model where south south trade can produce the observed patterns of skill premia in the south in this context south south trade expands the import range of the country that reduces the tariff this increases the demand for and the cost of skilled workers in the other country this also leads the country that reduces the tariff to expand its export range and reduce its import range therefore the country that reduces the tariff experiences an increase in its export range which leads to an increase in the skill premium as the impact on the import range is ambiguous it is possible that the other country experiences a decline in the skill premium thus trade liberalisation between southern countries can cause an increase in the skill premium in one and a decrease in the skill premium in another

economic openness democracy and income inequality an empirical analysis scholars have studied effects of economic openness and democracy on national income inequality in two literatures in democracy studies scholars agree democracy reduces inequality but empirical evidence is ambiguous in globalization studies effects of economic openness on inequality are debated but have not been rigorously examined this article is the first systematic statistical study of the effects of both economic openness and democracy on income inequality these effects need to be studied together the authors measure national income inequality from a comprehensive gini coefficient data set economic openness is measured from trade flows foreign direct investment inflows and financial capital inflows the period studied is 1960 to 1996 the unit of analysis is a country decade and the sample includes 69 countries the authors find that democracy and trade reduce income inequality foreign direct investments increase income inequality and financial capital does not affect income inequality policy implications are discussed

what is behind increasing wage inequality in mexico abstract we evaluate the impact of the educational expansion and changes in labor market institutions on wage inequality among mexican workers using a simulation technique proposed by knight and sabot the american economic review 73 5 1983 1132 1136 we conclude that while increases in the relative rate of return of higher education would have induced an increase in wage inequality changes in the composition of the educational distribution would have led to a stronger decline in wage inequality instead increased wage inequality is largely explained by changes in mexican labor market institutions namely unionization rate and minimum wages

quality ladders and product cycles we develop a two country model of endogenous innovation and imitation in order to study the interactions between these two processes firms in the north race to bring out the next generation of a set of technology intensive products each product potentially can be improved a countably infinite number of times but quality improvements require the investment of resources and entail uncertain prospects of success in the south entrepreneurs invest resources in order to learn the production processes that have been developed in the north all r d investment decisions are made by forward looking profit maximizing entrepreneurs the steady state equilibrium is characterized by constant aggregate rates of innovation and imitation we study how these rates respond to changes in the sizes of the two regions and to policies in each region to promote learning

spillovers from foreign direct investment within or between industries this paper contributes an estimation framework to measure both technological and linkage externalities from foreign direct investment fdi empirical research dealt mainly with intra industry spillovers from fdi with restrictive treatment of inter industry effects until recently however as optimal organization of the multinational corporation mnc involves minimization of profit losses due to leakage of technical information to competitors host country firms within the mnc s sector experience limited productivity gains ensuing fdi host country producers in other sectors may benefit for example mncs transfer knowledge to local downstream clients or outsource to local upstream suppliers hence fdi substitutes within sector domestic investment but complements it across sectors the net impact on aggregate capital formation by host country producers hinges on the interaction between linkages and spillovers estimations based on the colombian manufacturing census yield the sectoral pattern of fdi spillovers displaying knowledge propagation between but not within industries the findings reveal outsourcing relationships of mncs with local upstream suppliers as the channel of diffusion

expected effects of the ecological tax reform for the polish economy abstract this study presents an assessment of possible consequences of ecological tax reform for the polish economy computable general equilibrium model has been used the model calibrated for the base year 1995 provides results for the year 2005 six different scenarios have been considered final results confirm both theoretical and practical implications of the ecological tax reforms experiences in western european countries the reform is the most favorable when it is based on the concept of shifting tax burden from labor force or households income to environmental pollution long run effects of the proposed tax reform in poland would not slow down the economic growth the reform however has to be implemented as a package of changes in the entire tax system such comprehensive reform could even contribute to economic growth of the polish economy

is there really a foreign ownership wage premium evidence from matched employer employee data numerous studies on firm level data have reported higher average wages in foreign owned firms than in domestically owned firms this however does not necessarily imply that the individual worker s wage increase with foreign ownership using detailed matched employer employee data on the entire swedish private sector we examine the effect of foreign ownership on individual wages controlling for individual and firm heterogeneity as well as for possible selection bias in foreign acquisitions we distinguish between foreign greenfields and takeovers and compare foreign owned firms with both domestic multinationals and local firms our results show a considerably smaller wage premium in foreign owned firms than what has been found in studies conducted at a more aggregate level moreover foreign takeovers of swedish firms tend to have no or even a negative effect on wages

foreign direct investment and income inequality in mexico 1990 2000 in this article we explore the relationship between the investments of multinational corporations foreign direct investment and income inequality in mexico we argue that mexico s liberalization of foreign direct investment fdi inflows in the 1990s provides a natural experiment to test how fdi affects income inequality in a middle income country we use an instrumental variables approach as our identification strategy to mitigate problems of endogeneity and omitted variable bias in an empirical test of the determinants of changes in income inequality from 1990 to 2000 we find that increased fdi inflows are associated with a decrease in income inequality within mexico s thirty two states the authors would like to thank lawrence broz john freeman matt gabel geoff garrett quan li eddy malesky layna mosley katie ridgeway pablo pinto john stringer and andy sobel for comments and suggestions jacob gerber and mariana medina provided excellent research assistance thanks also to patricio aroca gonzalez for generously providing us with his data we acknowledge the financial support of the weidenbaum center on the economy government and public policy nate jensen s contribution to this article was written as a global fellow at ucla s international institute

are asean countries havens for japanese pollution intensive industry in an era of closer worldwide economic integration the role that environmental regulations play in shaping a country s comparative advantage is greater than ever this has led to fears that dirty firms will relocate from developed to developing countries where environmental regulations may be less stringent the so called pollution haven hypothesis to date however there is little support for the existence of pollution havens despite anecdotal evidence and the theoretical predictions in this paper we employ a unique industry level dataset for japan and examine whether japanese industries have relocated production to their asean neighbours in response to the relative stringency of japanese environmental regulations not only do we find no evidence for pollution haven consistent behaviour but also some indication that the complex relationship between the characteristics of japanese dirty industries and environmental regulations may actually have reduced japanese outward fdi to the philippines

foreign ownership and wages evidence from hungary 1986 2008 this article estimates the wage effects of foreign direct investment fdi using firm level and linked employer employee panel data containing a large number of foreign acquisitions over a long per