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Is More Mobility Good? Firm Mobility and the Low Wage-Low Productivity Trap

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Stephanie Seguino

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Abstract

This paper explores the possibility that unregulated FDI flows are causally implicated in the decline in labor productivity growth in semi- industrialized economies. These effects are hypothesized to operate through the negative impact of firm mobility on worker bargaining power and thus affecting wages. Downward pressure on wages can reduce the pressure on firms to raise productivity in defense of profits, contributing to a low wage–low productivity trap. This paper presents empirical evidence, based on panel data fixed effects and GMM estimation for 37 semi-industrialized economies, that supports the causal link between increased firm mobility and lower wages, as well as slower productivity growth over the period 1970–2000.

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Paper provided by EconWPA in its series International Trade with number 0505008.

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Length: 41 pages
Date of creation: 10 May 2005
Date of revision:
Handle: RePEc:wpa:wuwpit:0505008

Note: Type of Document - pdf; pages: 41
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Web page: http://129.3.20.41

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Keywords: Foreign direct investment productivity capital mobility.

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Find related papers by JEL classification:
F2 - International Economics - - International Factor Movements and International Business
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
O3 - Economic Development, Technological Change, and Growth - - Technological Change

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References listed on IDEAS
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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    Other versions:
  2. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
  3. Seguino, Stephanie, 2000. "The Effects of Structural Change and Economic Liberalisation on Gender Wage Differentials in South Korea and Taiwan," Cambridge Journal of Economics, Oxford University Press, vol. 24(4), pages 437-59, July.
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    Other versions:
  5. FRANK BARRY & HOLGER GÖRG & ERIC STROBL, 2005. "Foreign direct investment and wages in domestic firms in Ireland: Productivity spillovers versus labour-market crowding out," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 12(1), pages 67-84, February. [Downloadable!] (restricted)
  6. Gerald Epstein & Elissa Braunstein, 2002. "Bargaining Power and Foreign Direct Investment in China: Can 1.3 Billion Consumers Tame the Multinationals?," Working Papers wp45, Political Economy Research Institute, University of Massachusetts at Amherst. [Downloadable!]
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  7. James Heintz, 2003. "The New Face of Unequal Exchange: Low-Wage Manufacturing, Commodity Chains, and Global Inequality," Working Papers wp59, Political Economy Research Institute, University of Massachusetts at Amherst. [Downloadable!]
  8. Standing, Guy, 1989. "Global feminization through flexible labor," World Development, Elsevier, vol. 17(7), pages 1077-1095, July. [Downloadable!] (restricted)
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  10. Minsik Choi, 2001. "Threat Effect of Foreign Direct Investment on Labor Union Wage Premium," Working Papers wp27, Political Economy Research Institute, University of Massachusetts at Amherst. [Downloadable!]
  11. Adalmir Marquetti, 2004. "Do Rising Real Wages Increase The Rate Of Labor-Saving Technical Change? Some Econometric Evidence," Metroeconomica, Blackwell Publishing, vol. 55(4), pages 432-441, November. [Downloadable!] (restricted)
  12. Brian J. Aitken & Ann E. Harrison, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June. [Downloadable!] (restricted)
  13. Asad Sayeed & Radhika Balakrishnan, 2002. "Why Do Firms Disintegrate? Towards an Understanding of the Firm Level Decision to Sub-Contract and Its Impact on Labor," SCEPA Working Papers 2002-12, Schwartz Center for Economic Policy Analysis (SCEPA), New School University. [Downloadable!]
  14. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July. [Downloadable!] (restricted)
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(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. Stephanie Seguino, 2005. "All types of inequality are not created equal: divergent impacts of inequality on economic growth," Working Papers 10, ECINEQ, Society for the Study of Economic Inequality, revised Oct 2005. [Downloadable!]
    Other versions:
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