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The Impact of Foreign Direct Investments on Labour Productivity: A review of the Evidence and Implications

Author

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  • Raluca Georgiana Popescu (Robu)

    (Bucharest Academy of Economic Studies, Romania)

Abstract

The paper presents several results concerning the impact of foreign direct investments on labour productivity in different countries. The focus is on the labour productivity differences that exist between the foreign and domestic companies and on the way these differences evolve in the host country. Results show that national companies generally increase their labour productivity due to the technological and managerial competences that they borrow from the foreign companies established in their country and also because: firstly they have to protect themselves from the new competition and secondly they must comply with the growing demand coming from the new investors. Due to their higher labour productivity, foreign firms offer higher wages to their employees. This also determines a growth in the salaries of national companies’ skilled workers. Therefore the wage inequalities and skill differences grow in countries that receive FDI, as to resume the critics. However the overall effect of a growing productivity is most oftenly translated into job creation and regional development.

Suggested Citation

  • Raluca Georgiana Popescu (Robu), 2010. "The Impact of Foreign Direct Investments on Labour Productivity: A review of the Evidence and Implications," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 13(36), pages 137-153, June.
  • Handle: RePEc:rej:journl:v:13:y:2010:i:36:p:137-153
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    File URL: http://www.rejournal.eu/sites/rejournal.versatech.ro/files/articole/2010-06-01/2131/je203620-20popescu20robu.pdf
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    Cited by:

    1. Petre Caraiani, 2010. "Bayesian Linear Estimation of Okun Coefficient for Romania: Sensitivity to Priors Distributions," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 13(38), pages 53-65, December.

    More about this item

    Keywords

    foreign investments; labour productivity; spillovers;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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