EconPapers    
Economics at your fingertips  
 

Foreign direct investment and inequality: Evidence from China's policy change

Anders Johansson () and Dan Liu

The World Economy, 2020, vol. 43, issue 6, 1647-1664

Abstract: In this paper, we examine the impact of foreign direct investment (FDI) on local urban inequality in China. Specifically, we consider the FDI policy change as an exogenous shock on the local labour markets. We find that cities that have experienced a bigger policy change in promoting FDI between 1997 and 2002 are significantly more unequal in 2005. This pattern is mainly driven by the positive association between FDI liberalisation and skill premia. The result holds after we control for other policy changes, such as privatisation of state‐owned enterprises, infrastructure and trade liberalisation. We then turn to investigate the mechanisms using firm and individual‐level information. Our firm‐level evidence shows that FDI firms not only hire relatively more high‐skilled workers but also provide relatively higher wages to high‐skilled workers compared to domestic firms. Moreover, the individual‐level analysis shows that FDI has a significantly positive spillover effect on wages received by skilled workers employed by state‐owned enterprises, but not wages of unskilled workers.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1111/twec.12901

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:worlde:v:43:y:2020:i:6:p:1647-1664

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0378-5920

Access Statistics for this article

The World Economy is currently edited by David Greenaway

More articles in The World Economy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2020-11-23
Handle: RePEc:bla:worlde:v:43:y:2020:i:6:p:1647-1664