FDI, Domestic Firms’ Productivity and Wage Premium of Skilled Workers: Evidence from Peru

Rebeca Ester Caritas Castro, Jaiho Chung and Ju-Hyun Pyun ()
Additional contact information
Rebeca Ester Caritas Castro: Korea University Business School, Republic of Korea
Jaiho Chung: Korea University Business School, Republic of Korea
Ju-Hyun Pyun: Korea University Business School, Republic of Korea

Journal of Economic Development, 2024, vol. 49, issue 4, 147-169

Abstract: This study investigates the impact of foreign direct investment (FDI) on the productivity of domestic firms using Peruvian firm-level data from the World Bank Enterprise Surveys. While previous studies have examined the mobility of workers from multinational enterprises (MNEs) to domestic firms, this study explores the opposite turnover which MNEs attract skilled workers from domestic firms. We find that the positive FDI spillover is significantly reduced for domestic firms that employ a higher share of skilled workers but pay lower wages, and some of them are even exposed to negative FDI spillover. These results suggest that the wage gap between MNEs and domestic firms can hinder human capital transfers to domestic firms, instead causing MNEs to absorb skilled workers from the domestic market. However, the wage gap effect hindering FDI spillover is less pronounced for domestic firms that license technology from foreign MNEs.

Keywords: Foreign Direct Investment; Labor Productivity; Skilled Labor; Human Capital; Peruvian Manufacturing Firm; Wage Premium (search for similar items in EconPapers)
JEL-codes: F21 J24 O19 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://jed.cau.ac.kr/archives/49-4/49-4-7.pdf Full text (application/pdf)

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:ris:jecdev:0104

Access Statistics for this article

Journal of Economic Development is currently edited by Sung Y. Park

More articles in Journal of Economic Development from The Economic Research Institute, Chung-Ang University Room 1040, Building 310, Chung-Ang University, 84 Heukseok-ro, Dongjak-gu, Seoul 06974, South Korea. Contact information at EDIRC.
Bibliographic data for series maintained by Tram Nguyen ().