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Labor Conflict and Foreign Investments: An Analysis of FDI in India

  • Nidhiya Menon

    (Brandeis University)

  • Paroma Sanyal

    (Brandeis University)

This paper analyzes patterns of foreign direct investment in India. We investigate how labor conflict, credit constraints, and indicators of a state’s economic health influence location decisions of foreign firms. We account for the possible endogeneity of labor conflict variables in modeling the location decisions of foreign firms. This is accomplished by using a state-specific fixed effects framework that captures the presence of unobservables, which may influence investment decisions and labor unrest simultaneously. Results indicate that labor unrest is endogenous across the states of India, and has a strong negative impact on foreign investment.

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File URL: http://econwpa.repec.org/eps/dev/papers/0504/0504006.pdf
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Paper provided by EconWPA in its series Development and Comp Systems with number 0504006.

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Length: 31 pages
Date of creation: 13 Apr 2005
Date of revision:
Handle: RePEc:wpa:wuwpdc:0504006
Note: Type of Document - pdf; pages: 31
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Wolfgang Keller & Stephen R. Yeaple, 2009. "Multinational Enterprises, International Trade, and Productivity Growth: Firm-Level Evidence from the United States," The Review of Economics and Statistics, MIT Press, vol. 91(4), pages 821-831, November.
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  3. Tybout, James, 1998. "Manufacuring firms in developing countries - how well do they do, and why?," Policy Research Working Paper Series 1965, The World Bank.
  4. Chhibber, Pradeep K & Majumdar, Sumit K, 1999. "Foreign Ownership and Profitability: Property Rights, Control, and the Performance of Firms in Indian Industry," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 209-38, April.
  5. Jonathan Eaton & Samuel Kortum, 1994. "International Patenting and Technology Diffusion," NBER Working Papers 4931, National Bureau of Economic Research, Inc.
  6. Klein, Michael & Aaron, Carl & Hadjimichael, Bita, 2001. "Foreign direct investment and poverty reduction," Policy Research Working Paper Series 2613, The World Bank.
  7. Sanyal, Paroma & Menon, Nidhiya, 2005. "Labor Disputes and the Economics of Firm Geography: A Study of Domestic Investment in India," Economic Development and Cultural Change, University of Chicago Press, vol. 53(4), pages 825-54, July.
  8. Haskel, Jonathan & Pereira, Sonia & Slaughter, Matthew, 2002. "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?," CEPR Discussion Papers 3384, C.E.P.R. Discussion Papers.
  9. Pitt, Mark M & Rosenzweig, Mark R & Gibbons, Donna M, 1993. "The Determinants and Consequences of the Placement of Government Programs in Indonesia," World Bank Economic Review, World Bank Group, vol. 7(3), pages 319-48, September.
  10. Bartik, Timothy J, 1985. "Business Location Decisions in the United States: Estimates of the Effects of Unionization, Taxes, and Other Characteristics of States," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(1), pages 14-22, January.
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