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.
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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