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Foreign Direct Investment, Productivity, Demand for Skilled Labour and Wage Inequality: An Analysis of Uruguay

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  • Adriana Peluffo

Abstract

type="main" xml:id="twec12180-abs-0001"> This study seeks to identify the causal effects of foreign ownership on productivity, the demand for skilled labour and wage inequality. With this aim, we use differences-in-differences techniques for a panel of Uruguayan manufacturing firms in the period 1997–2005. Our results seem to indicate that FDI causes higher productivity and increased demand for skilled labour. Furthermore, although average wages are higher in foreign-owned firms than in domestic ones, the wage gap between skilled and unskilled workers is wider. It follows that promoting foreign investment enhances productivity. In addition, due to the greater demand for skilled workers, policies such as training schemes would be conducive to raising productivity still further, while other social policies could help to mitigate the wage inequality effects.

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  • Adriana Peluffo, 2015. "Foreign Direct Investment, Productivity, Demand for Skilled Labour and Wage Inequality: An Analysis of Uruguay," The World Economy, Wiley Blackwell, vol. 38(6), pages 962-983, June.
    • Handle: RePEc:bla:worlde:v:38:y:2015:i:6:p:962-983
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    3. Lee, In Hyeock (Ian) & Hong, Eunsuk & Makino, Shige, 2020. "The effect of non-conventional outbound foreign direct investment (FDI) on the domestic employment of multinational enterprises (MNEs)," International Business Review, Elsevier, vol. 29(3).
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    5. Syeda Tamkeen Fatima & Abdul Qayyum Khan, 2018. "Foreign direct investment and its impact on real wages: evidence from Turkish micro-level data," International Review of Applied Economics, Taylor & Francis Journals, vol. 32(6), pages 732-749, November.
    6. Gnangnon, Sèna Kimm, 2020. "Aid for Trade flows and Wage Inequality in the manufacturing sector of recipient-countries," EconStor Preprints 213936, ZBW - Leibniz Information Centre for Economics.
    7. Sugandha Huria & Manoj Pant, 2018. "Foreign direct investment, welfare and wage inequality in a small open economy: theory and empirics," Indian Economic Review, Springer, vol. 53(1), pages 131-166, December.
    8. Boker Poumie & Dounya Matsop Claude, 2021. "Does Foreign Capital Really Matter for Employment? Evidence from Agricultural Dominance African Countries," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 9(2), pages 88-104, June.
    9. Kluge, Jan & Lappoehn, Sarah & Plank, Kerstin, 2020. "The Determinants of Economic Competitiveness," IHS Working Paper Series 24, Institute for Advanced Studies.
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    11. Galina Hale & Mingzhi Xu, 2016. "FDI effects on the labor market of host countries," Working Paper Series 2016-25, Federal Reserve Bank of San Francisco.
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    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O39 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Other

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