IDEAS home Printed from https://ideas.repec.org/p/epa/cepawp/2002-08.html
   My bibliography  Save this paper

Does Inward Foreign Direct Investment Contribute to Skill Upgrading in Developing Countries?

Author

Listed:

Abstract

How do multinational firms affect both the demand for and supply of skills in host-country labor markets? On the demand side, inward can FDI stimulate demand for more-skilled workers in host countries through several channels. To date, most empirical evidence indicates that these channels work mainly within multinationals themselves, rather than through knowledge spillovers to domestic firms. On the supply side, the question of how inward FDI influences the development of human capital is much less clear, with possible links at both the micro- and macro-levels. This paper offers some new empirical evidence on the links between inward FDI and within-industry skill upgrading for a country-industry-year panel spanning both developed and developing countries. The main empirical finding is a robustly positive correlation between skill upgrading and the presence of affiliates of U.S. multinationals, with this correlation even stronger among the sub-sample of developing countries. This correlation is consistent with inward FDI stimulating skill upgrading in these developing countries.

Suggested Citation

  • Matthew J. Slaughter, 2002. "Does Inward Foreign Direct Investment Contribute to Skill Upgrading in Developing Countries?," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2002-08, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
  • Handle: RePEc:epa:cepawp:2002-08
    as

    Download full text from publisher

    File URL: http://www.economicpolicyresearch.org/scepa/publications/workingpapers/2002/cepa200208.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Jonathan E. Haskel & Sonia C. Pereira & Matthew J. Slaughter, 2007. "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?," The Review of Economics and Statistics, MIT Press, pages 482-496.
    2. Markusen, James R. & Venables, Anthony J., 2000. "The theory of endowment, intra-industry and multi-national trade," Journal of International Economics, Elsevier, pages 209-234.
    3. Aitken, Brian & Harrison, Ann & Lipsey, Robert E., 1996. "Wages and foreign ownership A comparative study of Mexico, Venezuela, and the United States," Journal of International Economics, Elsevier, pages 345-371.
    4. Aitken, Brian & Harrison, Ann & DEC, 1994. "Do domestic firms benefit from foreign direct investment? Evidence from panel data," Policy Research Working Paper Series 1248, The World Bank.
    5. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, January.
    6. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, Oxford University Press, pages 367-397.
    7. Horstmann, Ignatius J & Markusen, James R, 1987. "Strategic Investments and the Development of Multinationals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 109-121, February.
    8. Robert E. Baldwin & Robert E. Lipsey & J. David Richards, 1998. "Geography and Ownership as Bases for Economic Accounting," NBER Books, National Bureau of Economic Research, Inc, number bald98-1.
    9. Robert E. Lipsey & Magnus Blomstrom & Eric D. Ramstetter, 1998. "Internationalized Production in World Output," NBER Chapters,in: Geography and Ownership as Bases for Economic Accounting, pages 83-138 National Bureau of Economic Research, Inc.
    10. Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, pages 205-226.
    11. Lynch, Lisa M, 1992. "Private-Sector Training and the Earnings of Young Workers," American Economic Review, American Economic Association, pages 299-312.
    12. Keller, Wolfgang, 2001. "The geography and channels of diffusion at the world's technology frontier," HWWA Discussion Papers 123, Hamburg Institute of International Economics (HWWA).
    13. Robert Scollay & John P. Gilbert, 2001. "New Regional Trading Arrangements in the Asia Pacific?," Peterson Institute Press: Policy Analyses in International Economics, Peterson Institute for International Economics, number pa63, February.
    14. Aitken, Brian & Harrison, Ann & Lipsey, Robert E., 1996. "Wages and foreign ownership A comparative study of Mexico, Venezuela, and the United States," Journal of International Economics, Elsevier, pages 345-371.
    15. Edwin Mansfield & Anthony Romeo, 1980. "Technology Transfer to Overseas Subsidiaries by U. S.-Based Firms," The Quarterly Journal of Economics, Oxford University Press, pages 737-750.
    16. Gordon H. Hanson & Raymond J. Mataloni, Jr. & Matthew J. Slaughter, 2001. "Expansion Strategies of U.S. Multinational Firms," NBER Working Papers 8433, National Bureau of Economic Research, Inc.
    17. Bernhofen, Daniel M., 1998. "Intra-industry trade and strategic interaction: Theory and evidence," Journal of International Economics, Elsevier, vol. 45(1), pages 77-96, June.
    18. Haskel, Jonathan E. & Slaughter, Matthew J., 2002. "Does the sector bias of skill-biased technical change explain changing skill premia?," European Economic Review, Elsevier, vol. 46(10), pages 1757-1783, December.
    19. David R. Howell & Susan S. Wieler, 1998. "Skill-Biased Demand Shifts and the Wage Collapse in the United States: A Critical Perspective," Eastern Economic Journal, Eastern Economic Association, vol. 24(3), pages 343-366, Summer.
    20. Markusen, James R. & Venables, Anthony J., 1998. "Multinational firms and the new trade theory," Journal of International Economics, Elsevier, pages 183-203.
    21. Steven Globerman & John C. Ries & Ilan Vertinsky, 1994. "The Economic Performance of Foreign Affiliates in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 27(1), pages 143-156, February.
    22. Slaughter, Matthew J., 2000. "Production transfer within multinational enterprises and American wages," Journal of International Economics, Elsevier, pages 449-472.
    23. Blomstrom, Magnus, 1986. "Foreign Investment and Productive Efficiency: The Case of Mexico," Journal of Industrial Economics, Wiley Blackwell, vol. 35(1), pages 97-110, September.
    24. Theodore H. Moran, 2001. "Parental Supervision: The New Paradigm for Foreign Direct Investment and Development," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa64.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Paul I. Ojeaga & Emmanuel O. George & Oluwatoyin Mathew & Adetunji Adekola, 2016. "What does FDI inflow mean for emerging african economies? Measuring the regional effects of FDI in Africa," Computational Methods in Social Sciences (CMSS), "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences, vol. 4(1), pages 29-46, June.
    2. M. Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2009. "Financial Globalization: A Reappraisal," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, pages 143-197.
    3. Pami Dua & B N Goldar & Smruti Ranjan Behera, 2011. "Foreign Direct Investment and Technology Spillover: An Evaluation Across Different Clusters in India," Working Papers id:4382, eSocialSciences.
    4. repec:eee:touman:v:54:y:2016:i:c:p:1-12 is not listed on IDEAS
    5. Malick Souare & Boxi Zhou, 2016. "Foreign-affiliate presence and skilled labour demand," International Economics and Economic Policy, Springer, pages 233-254.
    6. Liang, Feng Helen, 2017. "Does foreign direct investment improve the productivity of domestic firms? Technology spillovers, industry linkages, and firm capabilities," Research Policy, Elsevier, pages 138-159.
    7. Tuan, Chyau & Ng, Linda F.Y. & Zhao, Bo, 2009. "China's post-economic reform growth: The role of FDI and productivity progress," Journal of Asian Economics, Elsevier, pages 280-293.
    8. Juan Julio Gutierrez, 2012. "Innovation in Low and Medium Technology Manufacturing," Chapters,in: The Regional Economics of Knowledge and Talent, chapter 5 Edward Elgar Publishing.
    9. Pami Dua & B N Goldar & Smruti Ranjan Behera, 2011. "Foreign Direct Investment and Technology Spillover: An Evaluation Across Different Clusters in India," Working Papers id:4382, eSocialSciences.
    10. Martin Aarøe Christensen, 2015. "A CGE model with ICT and R&D-driven endogenous growth: A detailed model description," JRC Working Papers JRC97908, Joint Research Centre (Seville site).
    11. Daniel Lederman & Taye Mengistae & Lixin Colin Xu, 2013. "Microeconomic consequences and macroeconomic causes of foreign direct investment in southern African economies," Applied Economics, Taylor & Francis Journals, vol. 45(25), pages 3637-3649, September.
    12. Kazuo Ogawa & Elmer Sterken & Ichiro Tokutsu, 2016. "International R&D Spillovers and Marginal Social Returns on R&D," CESifo Working Paper Series 6255, CESifo Group Munich.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:epa:cepawp:2002-08. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bridget Fisher). General contact details of provider: http://edirc.repec.org/data/cenewus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.