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Outward FDI and income inequality in the home country: The role of wage bargaining

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  • Anwar, Sajid
  • Sun, Sizhong

Abstract

In the process of economic globalization, firms extending operations via Foreign Direct Investment (FDI) encounter significant effects on wage inequality. Workers with bargaining power can negotiate favorable terms, while those without this influence face pronounced disparities. Building on the framework of Helpman et al. (2010), this study examines the impact of non-bargaining workers on income inequality during the transition from autarky to outward FDI. The results highlight a marked increase in wage gaps, particularly with greater outward FDI intensity. Moreover, under certain conditions, there is a notable rise in overall inequality, as measured by the Theil index.

Suggested Citation

  • Anwar, Sajid & Sun, Sizhong, 2025. "Outward FDI and income inequality in the home country: The role of wage bargaining," International Review of Economics & Finance, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:reveco:v:101:y:2025:i:c:s1059056025003296
    DOI: 10.1016/j.iref.2025.104166
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    Keywords

    Outward FDI; Wage income inequality; Globalization; Wage bargaining;
    All these keywords.

    JEL classification:

    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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