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Do Multinational Enterprises push up the Wages of Domestic Firms in the Italian Manufacturing Sector?

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  • Rosanna Pittiglio
  • Filippo Reganati
  • Edgardo Sica

Abstract

The present paper aims to test the impact of incoming Foreign Direct Investment (FDI) on local wages in the Italian manufacturing sector by using firm level data from 2002 to 2007. Results initially show the lack of wage spillovers at both horizontal and vertical level, meaning that the effects of foreign investment are completely internalized within each firm. However, when the technology gap is taken into account, we find some evidence of a non-linear relationship between gap size and wage spillover. In particular, if the technological gap between local firms and foreign companies is too large, Multinational Enterprises (MNEs) face some difficulty in interacting with domestic suppliers and customers, with the consequence that they act like monads within the host country. We therefore believe that policies favouring the attraction of inward investments, should not be of the ‘one for all’ or ‘one for always’ type, but must be strongly directed towards the sectoral and local characteristics of the host country.

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Bibliographic Info

Paper provided by FIW in its series FIW Working Paper series with number 099.

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Length: 28
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:wsr:wpaper:y:2012:i:099

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Related research

Keywords: Foreign Direct Investment; Multinational Enterprises; Horizontal Wage Spillovers; Vertical Wage Spillovers; Technological Gap;

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References

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  1. Blomstrom, Magnus & Kokko, Ari, 1998. " Multinational Corporations and Spillovers," Journal of Economic Surveys, Wiley Blackwell, vol. 12(3), pages 247-77, July.
  2. Brian Aitken & Ann Harrison & Robert E. Lipsey, 1997. "Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela and the United States," NBER Working Papers 5102, National Bureau of Economic Research, Inc.
  3. Bedi, A.S. & Cieslik, A., 2000. "Wages and wage growth in Poland : the role of foreign direct investment," ISS Working Papers - General Series 19068, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
  4. Ferragina, Anna & Pittiglio, Rosanna & Reganati, Filippo, 2012. "Multinational status and firm exit in the Italian manufacturing and service sectors," Structural Change and Economic Dynamics, Elsevier, vol. 23(4), pages 363-372.
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  6. Blomstrom, Magnus & Sjoholm, Fredrik, 1999. "Technology transfer and spillovers: Does local participation with multinationals matter?1," European Economic Review, Elsevier, vol. 43(4-6), pages 915-923, April.
  7. Elena Arnal & Alexander Hijzen, 2008. "The Impact of Foreign Direct Investment on Wages and Working Conditions," OECD Social, Employment and Migration Working Papers 68, OECD Publishing.
  8. Christopher F Baum, 2006. "An Introduction to Modern Econometrics using Stata," Stata Press books, StataCorp LP, number imeus, April.
  9. Sophia Dimelis, 2005. "Spillovers from foreign direct investment and firm growth: technological, financial and market structure effects," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 12(1), pages 85-104.
  10. Nigel Driffield & Sourafel Girma, 2003. "Regional Foreign Direct Investment and Wage Spillovers: Plant Level Evidence from the UK Electronics Industry," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(4), pages 453-474, 09.
  11. Emilio Colombo & Luca Stanca, 2008. "The Impact of Training on Productivity: Evidence from a Large Panel of Firms," Working Papers 134, University of Milano-Bicocca, Department of Economics, revised Jan 2008.
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