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Labor Conflict and Foreign Investments: An Analysis of FDI in India

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  • Nidhiya Menon

    (Brandeis University)

  • Paroma Sanyal

    (Brandeis University)

Abstract

This paper analyzes patterns of foreign direct investment in India. We investigate how labor conflict, credit constraints, and indicators of a state’s economic health influence location decisions of foreign firms. We account for the possible endogeneity of labor conflict variables in modeling the location decisions of foreign firms. This is accomplished by using a state-specific fixed effects framework that captures the presence of unobservables, which may influence investment decisions and labor unrest simultaneously. Results indicate that labor unrest is endogenous across the states of India, and has a strong negative impact on foreign investment.

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Bibliographic Info

Paper provided by EconWPA in its series Development and Comp Systems with number 0504006.

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Length: 31 pages
Date of creation: 13 Apr 2005
Date of revision:
Handle: RePEc:wpa:wuwpdc:0504006

Note: Type of Document - pdf; pages: 31
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Web page: http://128.118.178.162

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Keywords: Foreign Direct Investment; Labor Disputes; Developing Countries; India.;

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  1. Sanyal, Paroma & Menon, Nidhiya, 2005. "Labor Disputes and the Economics of Firm Geography: A Study of Domestic Investment in India," Economic Development and Cultural Change, University of Chicago Press, vol. 53(4), pages 825-54, July.
  2. Pitt, Mark M & Rosenzweig, Mark R & Hassan, Md Nazmul, 1990. "Productivity, Health, and Inequality in the Intrahousehold Distribution of Food in Low-Income Countries," American Economic Review, American Economic Association, vol. 80(5), pages 1139-56, December.
  3. Bartik, Timothy J, 1985. "Business Location Decisions in the United States: Estimates of the Effects of Unionization, Taxes, and Other Characteristics of States," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(1), pages 14-22, January.
  4. James Tybout, 1998. "Manufacturing Firms In Developing Countries: How Well Do They Do, And Why?," Development and Comp Systems 9805004, EconWPA.
  5. Jonathan Eaton & Samuel Kortum, 1994. "International Patenting and Technology Diffusion," Boston University - Institute for Economic Development 50, Boston University, Institute for Economic Development.
  6. Pitt, Mark M & Rosenzweig, Mark R & Gibbons, Donna M, 1993. "The Determinants and Consequences of the Placement of Government Programs in Indonesia," World Bank Economic Review, World Bank Group, vol. 7(3), pages 319-48, September.
  7. Jonathan E. Haskel & Sonia C. Pereira & Matthew J. Slaughter, 2002. "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?," NBER Working Papers 8724, National Bureau of Economic Research, Inc.
  8. Stephen R. Yeaple & Wolfgang Keller, 2003. "Multinational Enterprises, International Trade, and Productivity Growth," IMF Working Papers 03/248, International Monetary Fund.
  9. Chhibber, Pradeep K & Majumdar, Sumit K, 1999. "Foreign Ownership and Profitability: Property Rights, Control, and the Performance of Firms in Indian Industry," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 209-38, April.
  10. Klein, Michael & Aaron, Carl & Hadjimichael, Bita, 2001. "Foreign direct investment and poverty reduction," Policy Research Working Paper Series 2613, The World Bank.
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Cited by:
  1. Nitin Gupta, 2011. "The Differential Effects of Financial Development on India's Industrial Performance," ASARC Working Papers 2011-12, The Australian National University, Australia South Asia Research Centre.
  2. Nidhiya Menon, 2010. "Obstacles to Business, Technology Use, and Firms with Female Principal Owners in Kenya," Working Papers 20, Brandeis University, Department of Economics and International Businesss School.

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