Pay More, Earn Less, Work Harder - New Evidence of Foreign Subsidiary Performance and Market Efficiency in Emerging Markets

Jensen, Camilla

doi:10.2139/ssrn.1485476

Cited by 1 publication

(4 citation statements)

References 32 publications

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“…Overall, the results are broadly consistent with previous findings and indicate that FDI increases labour market inequality by increasing the relative demand for skilled labour and raising the skilled wage premium. (Bruno et al, 2004;Earle and Telegdy;2007;Jensen, 2009;Franco and Gerussi, 2010;Figini and Görg, 2011). Increased trade also leads to an increase in the Gini index value suggesting that trade liberalisation can increase the wage differential between skilled and unskilled workers as a result of an increase in the returns to skilled labour, this is consistent with the findings of Peter (2003), Onaran and Stockhammer (2008) and Lechthaler and Mileva (2014).…”

Section: Fixed Effectssupporting

confidence: 78%

“…However, they do not give a clear explanation for their finding of only a small difference between the unconditional estimates and those controlling for workers characteristics, even though worker characteristics are highly correlated with both wages and ownership. Jensen (2009) investigates foreign subsidiaries' performance and market efficiency effects in Poland during the period 1993-2004. In analysing the direct and indirect effects of FDI she uses firm-level panel for manufacturing sector estimating total factor productivity, labour productivity, employment growth, mark-up levels and profitability.…”

Section: Theoretical Framework and Previous Empirical Analysesmentioning

confidence: 99%

“…Firm-level empirical studies generally findEmpirical evidence suggests that foreign-owned firms pay higher wages relative to domestic ones. In part, these differences in wages can be explained by differences in worker characteristics, such as education, skills, age and gender, ethnicity, occupation and the differing wage returns for those skills (Earle and Telegdy, 2007;Jensen, 2009;Eriksson and Pytlikova, 2011). Jensen and Rosas (2007) argue that one should approach the analysis of the determinants of wage inequality very carefully since potential issues of reverse causality, selection bias, and omitted variables can lead to spurious results.…”

Section: Theoretical Framework and Previous Empirical Analysesmentioning

confidence: 99%

“…Empirical evidence suggests that foreign-owned firms pay higher wages relative to domestic ones. In part, these differences in wages can be explained by differences in worker characteristics, such as education, skills, age and gender, ethnicity, occupation and the differing wage returns for those skills (Earle and Telegdy, 2007;Jensen, 2009;Eriksson and Pytlikova, 2011).…”

Section: Wage Inequality In Transition Economiesmentioning

confidence: 99%

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Did FDI increase wage inequality in transition economies?

Alili

Adnett

2018

IJSE

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Purpose of this paper-The last two decades have been characterised by a rise in income and wage inequality in a wide range of countries, including European transition countries. The rise in globalisation is one major factor explaining this increasing wage inequality. International trade and FDI have increased significantly since the beginning of transition and this paper focuses onexamines whether FDI plays an important role in explaining the pattern of wage inequality in selected transition countries. Design/methodology/approach-A crosscountry empirical investigation has been conducted using two alternative measures of wage inequality: the Gini coefficient and the Theil index. Several model specifications and estimation strategies have been employed to obtain consistent estimates and to check for the robustness of the results. Findings-The results indicate that a rising share of inward FDI in GDP increased wage inequality in transition economies, though its overall effect was relatively small. Considering the long run, there is no clear evidence of a concave relationship between FDI and wage inequality, which may be a consequence of the relatively low high levels of FDI in manyost transition countries. Practical implications-Inwards FDI has made a small contribution to increasing wage inequality in European transition economies. However, its overall beneficial effects on labour markets in these countries suggests that rather than restricting FDI governments should target increasing the supply of skilled labour. What is original/value of paper-This new empirical evidence supports the hypothesis that an increased inward FDI stock as a share of GDP increases wage inequality in transition economies, however this relationship ismay be a complex one. Differences in average wages, wage differentials, employment shares of skilled workers and relative size of the foreignowned sector are all likely to be important for the behaviour of wage inequality.

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