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Does Inward Foreign Direct Investment Contribute to Skill Upgrading in Developing Countries?

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Author Info
Matthew J. Slaughter (Dartmouth College and NBER)
Abstract

How do multinational firms affect both the demand for and supply of skills in host-country labor markets? On the demand side, inward can FDI stimulate demand for more-skilled workers in host countries through several channels. To date, most empirical evidence indicates that these channels work mainly within multinationals themselves, rather than through knowledge spillovers to domestic firms. On the supply side, the question of how inward FDI influences the development of human capital is much less clear, with possible links at both the micro- and macro-levels. This paper offers some new empirical evidence on the links between inward FDI and within-industry skill upgrading for a country-industry-year panel spanning both developed and developing countries. The main empirical finding is a robustly positive correlation between skill upgrading and the presence of affiliates of U.S. multinationals, with this correlation even stronger among the sub-sample of developing countries. This correlation is consistent with inward FDI stimulating skill upgrading in these developing countries.

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Paper provided by Schwartz Center for Economic Policy Analysis (SCEPA), The New School in its series SCEPA Working Papers with number 2002-08.

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Length: 36 pages
Date of creation: Jun 2002
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Handle: RePEc:epa:cepawp:2002-08

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Monnet Gbakou & Mustapha Sadni Jallab & René Sandretto, 2008. "Foreign Direct Investment, Macroeconomic Instability And Economic Growth in MENA Countries," Post-Print halshs-00303694_v1, HAL. [Downloadable!]
    Other versions:
  2. Ana Margarida Fernandez & Pablo Fajnzylber, 2004. "International Technology Diffusion and the Demand for Skilled Labor: Evidence from East Asia and Latin America," Econometric Society 2004 Latin American Meetings 290, Econometric Society. [Downloadable!]
  3. Fajnzylber, Pablo & Fernandes,Ana Margarida, 2004. "International economic activities and the demand for skilled labor: evidence from Brazil and China," Policy Research Working Paper Series 3426, The World Bank. [Downloadable!]
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