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Foreign Direct Investment, Wage Inequality, and Skilled Labor Demand in EU Accession Countries

Author Info

  • Giovanni S.F. Bruno

    (Bocconi University, Milan)

  • Rosario Crinò

    (CESPRI-Bocconi University)

  • Anna M. Falzoni

    (University of Bergamo; CESPRI-Bocconi University)

Abstract

During the 1990s Poland, Hungary and the Czech Republic have experienced rapid increases in wage inequality between skilled and unskilled workers and received the largest FDI inflow in Central and Eastern Europe. This paper analyzes whether FDI has contributed to the raise in earning inequality via a change in the skill composition of labor demand in the three countries. While we find that in Hungary and the Czech Republic FDI exerts a positive direct impact on the skill-premium, in none of the countries considered FDI has worsened wage inequality by favoring labor demand shifts.

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File URL: http://www.dagliano.unimi.it/media/WP2004_188.pdf
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Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 188.

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Date of creation: 01 Oct 2004
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Handle: RePEc:csl:devewp:188
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Keywords: Foreign direct investment; Labor demand; Wage inequality;

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Find related papers by JEL classification:
  • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
  • 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
  • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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  1. Tito Boeri & Katherine Terrell, 2001. "Institutional Determinants of Labor Reallocation in Transition," William Davidson Institute Working Papers Series 384, William Davidson Institute at the University of Michigan.
  2. David Autor & Lawrence Katz & Alan Krueger, 1997. "Computing Inequality: Have Computers Changed the Labor Market?," Working Papers 756, Princeton University, Department of Economics, Industrial Relations Section..
  3. Stephen Machin & John Van Reenen, 1998. "Technology and changes in skill structure: evidence from seven OECD countries," IFS Working Papers W98/04, Institute for Fiscal Studies.
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  6. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
  7. Fleisher, Belton M. & Sabirianova, Klara & Wang, Xiaojun, 2005. "Returns to skills and the speed of reforms: Evidence from Central and Eastern Europe, China, and Russia," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 351-370, June.
  8. Pinelopi K. Goldberg & Nina Pavcnik, 2004. "Trade, Inequality, and Poverty: What Do We Know? Evidence from Recent Trade Liberalization Episodes in Developing Countries," NBER Working Papers 10593, National Bureau of Economic Research, Inc.
  9. Bruce A. Blonigen & Matthew J. Slaughter, 2001. "Foreign-Affiliate Activity And U.S. Skill Upgrading," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 362-376, May.
  10. Nauro F. Campos & Fabrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," William Davidson Institute Working Papers Series 470, William Davidson Institute at the University of Michigan.
  11. Nina Pavcnik, 2000. "What Explains Skill Upgrading in Less Developed Countries?," NBER Working Papers 7846, National Bureau of Economic Research, Inc.
  12. Slaughter, Matthew J., 2000. "Production transfer within multinational enterprises and American wages," Journal of International Economics, Elsevier, vol. 50(2), pages 449-472, April.
  13. Commander, Simon & Köllő, János, 2004. "The Changing Demand for Skills: Evidence from the Transition," IZA Discussion Papers 1073, Institute for the Study of Labor (IZA).
  14. Rosario Crinò, 2004. "Wages, Skills and International Integration in Poland, Hungary and the Czech Republic: An Industry-Level Analysis," KITeS Working Papers 160, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jul 2004.
  15. Hanson, G.H. & Harrison, A., 1995. "Trade, Technology and Wage Inequality," Papers 95-20, Columbia - Graduate School of Business.
  16. Michael A. Landesmann & Robert Stehrer, 2002. "Evolving Competitiveness of CEEC’s in an Enlarged Europe," Rivista di Politica Economica, SIPI Spa, vol. 92(1), pages 23-88, January-F.
  17. Markusen, James R. & Venables, Anthony, 1996. "The role of multinational firms in the wage-gap debate," Discussion Papers, Series II 322, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
  18. Eli Berman & John Bound & Zvi Griliches, 1993. "Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufacturing," NBER Working Papers 4255, National Bureau of Economic Research, Inc.
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  20. Head, Keith & Ries, John, 2002. "Offshore production and skill upgrading by Japanese manufacturing firms," Journal of International Economics, Elsevier, vol. 58(1), pages 81-105, October.
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Cited by:

  1. Fatima, Syeda Tamkeen, 2014. "Off-Shoring and Wage Inequality: where do we stand?," IEE Working Papers 207, Institut fuer Entwicklungsforschung und Entwicklungspolitik, Ruhr-Universitaet Bochum.
  2. Eva Katalin Polgar & Julia Woerz, 2011. "Trade With Central and Eastern Europe: Is It Really a Threat to Wages in the West?," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 1, pages 1-31, March.
  3. Crinò, Rosario, 2012. "Imported inputs and skill upgrading," Labour Economics, Elsevier, vol. 19(6), pages 957-969.
  4. Lorentowicz, Andzelika & Marin, Dalia & Raubold, Alexander, 2005. "Is Human Capital Losing from Outsourcing? Evidence for Austria and Poland," CEPR Discussion Papers 5344, C.E.P.R. Discussion Papers.
  5. Michael Moritz, 2009. "The impact of European integration on wage differentials in the Bavarian–Czech border region," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer, vol. 3(2), pages 137-151, October.
  6. Peter Nunnenkamp & Rainer Schweickert & Manfred Wiebelt, 2006. "Distributional Effects of FDI: How the Interaction of FDI and Economic Policy Affects Poor Households in Bolivia," Kiel Working Papers 1281, Kiel Institute for the World Economy.
  7. Egger, Peter & Eggert, Wolfgang & Winner, Hannes, 2010. "Saving taxes through foreign plant ownership," Journal of International Economics, Elsevier, vol. 81(1), pages 99-108, May.
  8. Philipp an de Meulen, 2011. "Labor Heterogeneity and the Risk of Expropriation in Less Developed Countries," Ruhr Economic Papers 0298, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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