FDI, technological progress and inequality

Rita Pető () and Balázs Reizer ()
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Rita Pető: HUN-REN Centre for Economic and Regional Studies
Balázs Reizer: HUN-REN Centre for Economic and Regional Studies

No 2510, KRTK-KTI WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: How does foreign direct investment impact wages and the task content of jobs? Using linked employer-employee data from Hungary and an event study approach we show that FDI increases the returns to abstract tasks, while it does not affect the returns to routine and face-to-face tasks. This finding appears to be driven by skill-biased changes in technology, as acquired firms innovate more with their foreign partners, import more machines and improve product quality. These suggest that FDI-induced technological change is an important driver of growing inequality in developing countries.

Keywords: wage inequality; foreign-owned firms (search for similar items in EconPapers)
JEL-codes: F23 J31 M52 (search for similar items in EconPapers)
Date: 2025-06
New Economics Papers: this item is included in nep-iaf
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