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Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela and the United States

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  • Brian Aitken
  • Ann Harrison
  • Robert E. Lipsey

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 which is robust across all three countries: higher levels of foreign investment are associated with higher wages. In Mexico and Venezuela, foreign investment was associated with higher wages only for foreign-owned firms -- there is no evidence of wage spillovers leading to higher wages for domestic firms. In the United States there is evidence of wage spillovers. The lack of spillovers in Mexico and Venezuela is consistent with significant wage differentials between foreign and domestic enterprises. In the United States, wage differentials are smaller.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5102.

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Date of creation: May 1995
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Publication status: published as Journal of International Economics, vol. 40. no. 3/4, May 1996, pp. 345-371
Handle: RePEc:nbr:nberwo:5102

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  1. Brian Aitken & Gordon H. Hanson & Ann E. Harrison, 1994. "Spillovers, Foreign Investment, and Export Behavior," NBER Working Papers 4967, National Bureau of Economic Research, Inc.
  2. Robert E. Lipsey, 1994. "Foreign-Owned Firms and U.S. Wages," NBER Working Papers 4927, National Bureau of Economic Research, Inc.
  3. Lucas, Robert E, Jr, 1993. "Making a Miracle," Econometrica, Econometric Society, Econometric Society, vol. 61(2), pages 251-72, March.
  4. Caves, Richard E, 1974. "Multinational Firms, Competition, and Productivity in Host-Country Markets," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 41(162), pages 176-93, May.
  5. Haddad, Mona & Harrison, Ann, 1993. "Are there positive spillovers from direct foreign investment? : Evidence from panel data for Morocco," Journal of Development Economics, Elsevier, Elsevier, vol. 42(1), pages 51-74, October.
  6. Romer, Paul, 1993. "Idea gaps and object gaps in economic development," Journal of Monetary Economics, Elsevier, Elsevier, vol. 32(3), pages 543-573, December.
  7. Gene M. Grossman & Elhanan Helpman, 1989. "Quality Ladders and Product Cycles," NBER Working Papers 3201, National Bureau of Economic Research, Inc.
  8. Kokko, Ari, 1994. "Technology, market characteristics, and spillovers," Journal of Development Economics, Elsevier, Elsevier, vol. 43(2), pages 279-293, April.
  9. Steven Globerman, 1979. "Foreign Direct Investment and `Spillover' Efficiency Benefits in Canadian Manufacturing Industries," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 12(1), pages 42-56, February.
  10. Robert E. Lipsey & Birgitta Swedenborg, 1981. "Foreign Takeovers of Swedish Firms," NBER Working Papers 0641, National Bureau of Economic Research, Inc.
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