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

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Author Info
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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Related research
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

This paper has been announced in the following NEP Reports:

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.:
  1. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment Updates and Implications," NBER Working Papers 7911, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    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.
  4. Robert C. Feenstra, . "Integration Of Trade And Disintegration Of Production In The Global Economy," Department of Economics 98-06, California Davis - Department of Economics. [Downloadable!]
    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!]
    Other versions:
  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)
  9. Blomstrom, Magnus & Persson, Hakan, 1983. "Foreign investment and spillover efficiency in an underdeveloped economy: Evidence from the Mexican manufacturing industry," World Development, Elsevier, vol. 11(6), pages 493-501, June. [Downloadable!] (restricted)
  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), The New School. [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)
  15. Blecker, Robert A., 1996. "The new economic integration: Structuralist models of North-South trade and investment liberalization," Structural Change and Economic Dynamics, Elsevier, vol. 7(3), pages 321-345, September. [Downloadable!] (restricted)
  16. Munisamy Gopinath & Weiyan Chen, 2003. "Foreign direct investment and wages: a cross-country analysis," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 12(3), pages 285-309, September. [Downloadable!] (restricted)
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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. Stephanie Seguino, 2005. "All Types of Inequality are Not Created Equal: Divergent Impacts of Inequality on Economic Growth," Economics Working Paper Archive wp_433, Levy Economics Institute, The. [Downloadable!]
    Other versions:
  2. Seguino, Stephanie, 2006. "The Road to Gender Equality: Global Trends and the Way Forward," MPRA Paper 6510, University Library of Munich, Germany. [Downloadable!]
  3. Seguino, Stephanie, 2006. "The great equalizer?: Globalization effects on gender equality in Latin America and the Caribbean," MPRA Paper 6509, University Library of Munich, Germany. [Downloadable!]
  4. Seguino, Stephanie, 2003. "Taking gender differences in bargaining power seriously: Equity, labor standards, and living wages
    [Gender Equality through Labor Standards and Living Wages: An Exploration of the Issues for Asian
    ," MPRA Paper 6508, University Library of Munich, Germany, revised Oct 2003. [Downloadable!]
  5. Seguino, Stephanie & Grown, Caren, 2006. "Gender equity and globalization: Macroeconomic policy for developing countries," MPRA Paper 6540, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  6. Yılmaz Kılıçaslan & Erol Taymaz, 2008. "Labor market institutions and industrial performance: an evolutionary study," Journal of Evolutionary Economics, Springer, vol. 18(3), pages 477-492, August. [Downloadable!] (restricted)
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