FDI and the Labor Share in Developing Countries: A Theory and Some Evidence

Bruno Decreuse and Paul Maarek

Annals of Economics and Statistics, 2015, issue 119-120, 289-319

Abstract: We address the effects of FDI on the labor share in developing countries. Our theory relies on the impacts of FDI on wage and labor productivity in a frictional labor market. FDI has two opposite effects on the labor share: a negative force originated by technological advance, and a positive force due to increased labor market competition between .rms. We test this theory on aggregate panel data through fixed effects and IV estimates. We examine the relationship between the labor share in the manufacturing sector and the ratio of FDI stock to GDP. We show that FDI has decreased the labor share in the host countries of our dataset. This impact amounts to between 10% to 20% of the mean labor share in our sample.

Date: 2015
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Related works:
Working Paper: FDI and the labor share in developing countries: A theory and some evidence (2015)
Working Paper: FDI and the labor share in developing countries: A theory and some evidence (2013)
Working Paper: FDI and the labor share in developing countries: A theory andsome evidence (2008)
Working Paper: FDI and the labor share in developing countries: a theory and some evidence (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2015:i:119-120:p:289-319

DOI: 10.15609/annaeconstat2009.119-120.289

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