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Is More Mobility Good? Firm Mobility and the Low Wage -- Low Productivity Trap

  • Stephanie Seguino

This paper explores the possibility that unregulated FDI flows are causally implicated in the decline in labor productivity growth in semi-industrialized economies. These effects are hypothesized to operate through the negative impact of firm mobility on worker bargaining power and thus affecting wages. Downward pressure on wages can reduce the pressure on firms to raise productivity in defense of profits, contributing to a low wageÐlow productivity trap. This paper presents empirical evidence, based on panel data fixed effects and GMM estimation for 37 semi-industrialized economies, that supports the causal link between increased firm mobility and lower wages, as well as slower productivity growth over the period 1970Ð2000.

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File URL: http://www.levyinstitute.org/pubs/wp_423.pdf
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Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_423.

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Date of creation: May 2005
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Handle: RePEc:lev:wrkpap:wp_423
Contact details of provider: Web page: http://www.levyinstitute.org

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