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Foreign Direct Investment, Productivity, Demand for Skilled Labour and Wage Inequality: An Analysis of Uruguay

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Listed:
  • Adriana Peluffo

Abstract

type="main" xml:id="twec12180-abs-0001"> This study seeks to identify the causal effects of foreign ownership on productivity, the demand for skilled labour and wage inequality. With this aim, we use differences-in-differences techniques for a panel of Uruguayan manufacturing firms in the period 1997–2005. Our results seem to indicate that FDI causes higher productivity and increased demand for skilled labour. Furthermore, although average wages are higher in foreign-owned firms than in domestic ones, the wage gap between skilled and unskilled workers is wider. It follows that promoting foreign investment enhances productivity. In addition, due to the greater demand for skilled workers, policies such as training schemes would be conducive to raising productivity still further, while other social policies could help to mitigate the wage inequality effects.

Suggested Citation

  • Adriana Peluffo, 2015. "Foreign Direct Investment, Productivity, Demand for Skilled Labour and Wage Inequality: An Analysis of Uruguay," The World Economy, Wiley Blackwell, vol. 38(6), pages 962-983, June.
    • Handle: RePEc:bla:worlde:v:38:y:2015:i:6:p:962-983
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    File URL: http://hdl.handle.net/10.1111/twec.2015.38.issue-6
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    Cited by:

    1. Feng, Wei & Yuan, Hang, 2025. "The impact of international technology spillovers on digital inequality in China," Technology in Society, Elsevier, vol. 81(C).
    2. Sanjaya Kumar Malik, 2019. "Foreign Direct Investment and Employment in Indian Manufacturing Industries," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 62(4), pages 621-637, December.
    3. Peluffo, Adriana & Silva, Ernesto, 2018. "Innovation and Employment," Conference papers 332986, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    4. Lee, In Hyeock (Ian) & Hong, Eunsuk & Makino, Shige, 2020. "The effect of non-conventional outbound foreign direct investment (FDI) on the domestic employment of multinational enterprises (MNEs)," International Business Review, Elsevier, vol. 29(3).
    5. Gnangnon, Sèna Kimm, 2020. "Aid for Trade flows and Wage Inequality in the manufacturing sector of recipient-countries," EconStor Preprints 213936, ZBW - Leibniz Information Centre for Economics.
    6. Grace Nkansa Asante & Kofi Kamasa & Myles Patrick Bartlett, 2022. "Foreign direct investment and economic growth nexus in ECOWAS: The leveraging effect of anti-corruption," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 14(2), pages 176-188.
    7. Boker Poumie & Dounya Matsop Claude, 2021. "Does Foreign Capital Really Matter for Employment? Evidence from Agricultural Dominance African Countries," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 9(2), pages 88-104, June.
    8. Peter Howard-Jones & Jens Hölscher, 2020. "The Influence Of The Washington Consensus Programme On The Transitional Economies Of Eastern Europe – A Firm-Level Analysis," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 65(226), pages 9-44, July – Se.
    9. Elena Kostenko & Vitaly Kostenko & Volodymyr Kuznichenko & Volodymyr Lapshyn, 2017. "International trade in Ukraine¡¯s regions during 2016 is analyzed. The taxonomy method is used to carry out a multidimensional analysis of the state of trade in all regions, with the goal of determini," Research in Applied Economics, Macrothink Institute, vol. 9(4), pages 64-74, December.
    10. Sanjaya Kumar Malik, 2019. "Employment Effect of Foreign Direct Investment in Indian Manufacturing Industries," Working Papers 206, Institute for Studies in Industrial Development (ISID).
    11. Burdín, Gabriel & De Rosa, Mauricio & Vigorito, Andrea & Vilá, Joan, 2022. "Falling inequality and the growing capital income share: Reconciling divergent trends in survey and tax data," World Development, Elsevier, vol. 152(C).
    12. Syeda Tamkeen Fatima & Abdul Qayyum Khan, 2018. "Foreign direct investment and its impact on real wages: evidence from Turkish micro-level data," International Review of Applied Economics, Taylor & Francis Journals, vol. 32(6), pages 732-749, November.
    13. Sugandha Huria & Manoj Pant, 2018. "Foreign direct investment, welfare and wage inequality in a small open economy: theory and empirics," Indian Economic Review, Springer, vol. 53(1), pages 131-166, December.
    14. Kluge, Jan & Lappoehn, Sarah & Plank, Kerstin, 2020. "The Determinants of Economic Competitiveness," IHS Working Paper Series 24, Institute for Advanced Studies.
    15. Galina Hale & Mingzhi Xu, 2016. "FDI effects on the labor market of host countries," Working Paper Series 2016-25, Federal Reserve Bank of San Francisco.
    16. Raihan, Selim, 2021. "Functional Income Distribution and Inequality in the Asia-Pacific Countries," MPRA Paper 110469, University Library of Munich, Germany.
    17. Sushil K. Rai & Akhilesh K. Sharma, 2020. "Causal Nexus Between FDI Inflows and Its Determinants in SAARC Countries," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 21(2), pages 193-215, September.

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O39 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Other

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