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Labor Heterogeneity and the Risk of Expropriation in Less Developed Countries

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  • an de Meulen, Philipp
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    Following the notion of skill-biased FDI fl ows from developed to less developed regions, high-skilled workers are likely to benefit from FDI to a larger extent. They earn a productivity advantage that potentially transfers into a skilled wage premium. This gives rise to distributional conflict that might turn into heterogeneous attitudes toward FDI inflows in line with skill. In this paper I study the eff ect of less developed countries' skill compositions on the risk of expropriation. Not surprisingly, it turns out that the risk of expropriation decreases with a larger employment share of high-skilled workers. However, in a theoretical model, the effect is diminishing and even turns negative in the empirical investigation: if the relative supply of high-skilled labor is too large, the skilled wage premium turns negative despite the skill-bias of FDI. Then, high-skilled workers' positive attitudes toward FDI vanish.

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    Paper provided by RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen in its series Ruhr Economic Papers with number 298.

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    Date of creation: 2011
    Handle: RePEc:zbw:rwirep:298
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