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The Impact of Foreign Direct Investment on Wages and Working Conditions

Author

Listed:
  • Elena Arnal

    (OECD)

  • Alexander Hijzen

    (OECD)

Abstract

Foreign direct investment (FDI) by OECD-based multinational enterprises (MNEs) in developing and emerging economies has increased dramatically over the past two decades. While generally perceived as beneficial for local development, it has also raised concerns about unfair competition and the protection of workers’ rights in host countries. This paper documents the recent increase in FDI and assesses its effects on wages and working conditions for workers of foreign affiliates of MNEs and those of their independent supplier firms. The evidence suggests that MNEs tend to provide better pay than their domestic counterparts, especially when they operate in developing and emerging economies. The positive impact on wages also appears to spread to the employees of domestic firms that serve as suppliers of MNEs or recruit managers with prior experience in foreign firms, but these spillover effects are small. MNEs also provide more training than domestic firms, but it is unclear whether this reflects a causal impact of foreign ownership. L’investissement direct étranger (IDE) des entreprises multinationales (EMN) originaires de pays de l’OCDE dans les économies en développement et émergentes a augmenté de façon spectaculaire au cours des deux dernières décennies. Quoique généralement perçu comme bénéfique pour le développement local, l’IDE amène aussi à s’interroger sur le caractère déloyal de la concurrence et sur la protection des droits des travailleurs dans les pays d’accueil. Ce document examine l’accroissement de l’IDE et en analyse les effets sur les salaires et les conditions de travail des salariés des filiales étrangères des entreprises multinationales et de leurs sous-traitants. Il apparaît que les EMN te ndent à offrir de meilleurs salaires, surtout dans les économies en développement et émergentes. Il semble aussi que l’effet positif sur les salaires s’étende aux salariés des entreprises locales auxquelles les EMN font appel pour la sous-traitance ou qui recrutent des dirigeants ayant une expérience préalable dans des entreprises étrangères, mais ces retombées sont limitées. Les EMN font aussi un plus gros effort de formation que les entreprises locales, mais on ne saurait dire si cela tient à ce que ce sont des sociétés étrangères.

Suggested Citation

  • Elena Arnal & Alexander Hijzen, 2008. "The Impact of Foreign Direct Investment on Wages and Working Conditions," OECD Social, Employment and Migration Working Papers 68, OECD Publishing.
  • Handle: RePEc:oec:elsaab:68-en
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    File URL: http://dx.doi.org/10.1787/230184240223
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    Cited by:

    1. Sapkota, Jeet Bahadur, 2011. "Impacts of globalization on quality of life: evidence from developing countries," MPRA Paper 37506, University Library of Munich, Germany.
    2. Rosanna Pittiglio & Filippo Reganati & Edgardo Sica, 2015. "Do Multinational Enterprises Push up the Wages of Domestic Firms in the Italian Manufacturing Sector?," Manchester School, University of Manchester, vol. 83(3), pages 346-378, June.
    3. Mădălina Ecaterina POPESCU & Amalia CRISTESCU & Mădălina Ecaterina POPESCU, 2016. "Net earnings trends in the EU countries," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(608), A), pages 351-360, Autumn.
    4. Mădălina Ecaterina POPESCU & Amalia CRISTESCU & Mădălina Ecaterina POPESCU, 2016. "Net earnings trends in the EU countries," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(608), A), pages 351-360, Autumn.

    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J80 - Labor and Demographic Economics - - Labor Standards - - - General

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