Foreign direct investment and wages in domestic firms in Ireland: Productivity spillovers versus labour-market crowding out

Frank Barry, Holger Görg and Eric Strobl ()

International Journal of the Economics of Business, 2005, vol. 12, issue 1, 67-84

Abstract: There is a large literature on the positive spillovers frequently thought to be associated with inward foreign direct investment. Aitken et al. (1996) identify several cases, however, where inward FDI appears to have reduced wages in domestic firms. They suggest that this might arise either because foreign firms increase the degree of product-market competition that domestic firms face, or because they poach the best workers from domestic firms. We concentrate on the second effect, arguing that the first is unlikely to arise in the Irish case to which our data pertain. In a theoretical section we show that the labour-market poaching effect cannot generate the results postulated if labour markets are competitive and production functions are of the Cobb-Douglas variety, but that it can arise if production functions display higher elasticities of substitution. In an empirical section based on a sample of larger Irish firms we show that, consistent with our theoretical model, foreign presence has different effects on wages and productivity in domestic exporting and non-exporting establishments.

Keywords: FDI; Spillovers; Labour Market; Crowding Out; JEL Classifications: F23; J23; J31 (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

Downloads: (external link)
http://www.tandfonline.com/10.1080/1357151042000323102 (text/html)
Access to full text is restricted to subscribers.

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:taf:ijecbs:v:12:y:2005:i:1:p:67-84

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CIJB20

DOI: 10.1080/1357151042000323102

Access Statistics for this article

International Journal of the Economics of Business is currently edited by Eleanor Morgan

More articles in International Journal of the Economics of Business from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().