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Foreign Investment and Wages: A Crowding-Out Effect in Mexico

Enrique Kato-Vidal

Latin American Journal of Economics-formerly Cuadernos de Economía, 2013, vol. 50, issue 2, 209-231

Abstract: The purpose of this article is to determine the impact of foreign direct investment (FDI) on a country’s overall economy rather than simply the sectors receiving such investment. The strategy consisted of adopting a crowding-in/crowding-out approach to Mexico’s total capital volume in the 1993-2010 period. The substitutability of foreign and local capital implies a lower-than-expected economic dynamism. Using a dynamic panel analysis, a negative relationship was found between FDI and the general wage. Throughout the analysis, firm size stands out as a key variable in explaining the impact of FDI.

Keywords: FDI; wage; firm size; substitutability of capital (search for similar items in EconPapers)
JEL-codes: F21 O11 C23 (search for similar items in EconPapers)
Date: 2013
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Latin American Journal of Economics-formerly Cuadernos de Economía is currently edited by Raimundo Soto

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