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FDI, technological progress and inequality

Author

Listed:
  • Rita Pető

    (HUN-REN Centre for Economic and Regional Studies)

  • Balázs Reizer

    (HUN-REN Centre for Economic and Regional Studies)

Abstract

How does foreign direct investment impact wages and the task content of jobs? Using linked employer-employee data from Hungary and an event study approach we show that FDI increases the returns to abstract tasks, while it does not affect the returns to routine and face-to-face tasks. This finding appears to be driven by skill-biased changes in technology, as acquired firms innovate more with their foreign partners, import more machines and improve product quality. These suggest that FDI-induced technological change is an important driver of growing inequality in developing countries.

Suggested Citation

  • Rita Pető & Balázs Reizer, 2025. "FDI, technological progress and inequality," CERS-IE WORKING PAPERS 2510, Institute of Economics, Centre for Economic and Regional Studies.
    • Handle: RePEc:has:discpr:2510
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    Keywords

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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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