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Inward Foreign Investment, Small-Scale Agricultural Modernization and Wage Inequality in Developing Countries

In: Wage Inequality from Agricultural Modernization

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  • Dianshuang Wang

    (Anhui University of Finance and Economics)

Abstract

This chapter examines how foreign investment influences wage inequality between skilled and unskilled labor, incorporating the context of small-scale agricultural modernization and rural–urban labor migration. Inward foreign capital enhances the productivity of the non-agricultural sector and expands its output, thereby facilitating agricultural modernization through the increased use of non-agricultural intermediate inputs in agricultural production. In small-scale agriculture, the adoption of more intermediate inputs substitutes for rural unskilled labor, promoting rural–urban migration. The theoretical analysis reveals that inward foreign investment has an ambiguous impact on wage inequality between skilled and unskilled labor, with the relationship determined by the elasticity of substitution between agricultural producer services and agricultural unskilled labor.

Suggested Citation

  • Dianshuang Wang, 2025. "Inward Foreign Investment, Small-Scale Agricultural Modernization and Wage Inequality in Developing Countries," Springer Books, in: Wage Inequality from Agricultural Modernization, chapter 0, pages 161-178, Springer.
    • Handle: RePEc:spr:sprchp:978-981-96-6851-9_8
    DOI: 10.1007/978-981-96-6851-9_8
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