OECD Social, Employment and Migration Working Papers

ISSN: 
1815-199X (online)
DOI: 
10.1787/1815199x
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This series is designed to make available to a wider readership selected labour market, social policy and migration studies prepared for use within the OECD. Authorship is usually collective, but principal writers are named. The papers are generally available only in their original language - English or French - with a summary in the other.
 

The Impact of Foreign Direct Investment on Wages and Working Conditions You or your institution have access to this content

English
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Author(s):
Elena Arnal1, Alexander Hijzen1
Author Affiliations
  • 1: OECD, France

23 Oct 2008
Bibliographic information
No.:
68
Pages:
39
DOI: 
10.1787/230184240223

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Foreign direct investment (FDI) by OECD-based multinational enterprises (MNEs) in developing and emerging economies has increased dramatically over the past two decades. While generally perceived as beneficial for local development, it has also raised concerns about unfair competition and the protection of workers’ rights in host countries. This paper documents the recent increase in FDI and assesses its effects on wages and working conditions for workers of foreign affiliates of MNEs and those of their independent supplier firms. The evidence suggests that MNEs tend to provide better pay than their domestic counterparts, especially when they operate in developing and emerging economies. The positive impact on wages also appears to spread to the employees of domestic firms that serve as suppliers of MNEs or recruit managers with prior experience in foreign firms, but these spillover effects are small. MNEs also provide more training than domestic firms, but it is unclear whether this reflects a causal impact of foreign ownership.
JEL Classification:
  • F16: International Economics / Trade / Trade and Labor Market Interactions
  • F21: International Economics / International Factor Movements and International Business / International Investment; Long-Term Capital Movements
  • F23: International Economics / International Factor Movements and International Business / Multinational Firms; International Business
  • J80: Labor and Demographic Economics / Labor Standards: National and International / General
 
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