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Foreign direct investment and wage dispersion: Evidence from French employer-employee data

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  • Laffineur, Catherine
  • Gazaniol, Alexandre

Abstract

This article investigates to what extent outward foreign direct investment (FDI) affects domestic wages. Results reveal that multinational companies pay a wage premium to their employees and the wage premium is increasing within the wage distribution. In a second step, we use a fixed effect and match effect model to analyze the effect of outward FDI within job spells. Results suggest that outward FDI raises manager wages by 0.077% and reduces wages for workers performing offshorable tasks by 0.34%. The positive effect of FDI on manager wages is mainly driven by the intensive margin of outward FDI. This result is observed even after controlling for endogenous worker mobility. Finally, we observe that the increase of outward foreign direct investment cause wages to be higher, and this effect is due to both multinational companies paying a wage premium and to changes in the market value of unobservable worker skills.

Suggested Citation

  • Laffineur, Catherine & Gazaniol, Alexandre, 2019. "Foreign direct investment and wage dispersion: Evidence from French employer-employee data," International Economics, Elsevier, vol. 157(C), pages 203-226.
    • Handle: RePEc:eee:inteco:v:157:y:2019:i:c:p:203-226
    DOI: 10.1016/j.inteco.2018.12.001
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    Cited by:

    1. Margarita Lopez-Forero, 2024. "Aggregate Labor Share and Tax Havens: Things are not always what they seem," Working papers 982, Banque de France.
    2. repec:iab:iabdpa:202024 is not listed on IDEAS
    3. Bakouan, Pousseni & Sawadogo, Relwendé, 2024. "BioTrade and income inequality: Does frontier technology readiness matter?," Structural Change and Economic Dynamics, Elsevier, vol. 70(C), pages 650-665.
    4. Koerner, Konstantin & Borrs, Linda & Eppelsheimer, Johann, 2023. "FDI and onshore job stability: Upgrades, downgrades, and separations in multinationals," European Economic Review, Elsevier, vol. 152(C).
    5. Khadija Straaten & Rajneesh Narula & Elisa Giuliani, 2023. "Publisher Correction: The multinational enterprise, development, and the inequality of opportunities: A research agenda," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 54(9), pages 1641-1641, December.
    6. Sawadogo, Relwendé & Ouoba, Youmanli, 2024. "Do natural resources rents reduce income inequality? A finite mixture of regressions approach," Resources Policy, Elsevier, vol. 91(C).
    7. Kuusi, Tero & Ali-Yrkkö, Jyrki, 2021. "BITs with a Bite? EU Home Investment Effects of EU-China Bilateral Investment Treaties," ETLA Reports 115, The Research Institute of the Finnish Economy.

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    Keywords

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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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