FDI and the relative wage in a North South global economy

Subhadip Ghosh ()
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Subhadip Ghosh: Indian Statistical Institute, New Delhi

Discussion Papers from Indian Statistical Institute, Delhi

Abstract: This paper examines the effect on relative wages when FDI occurs from the North to the South. The Northern firms undertake FDI to take advantage of the lower wage of unskilled labor in the South. The key assumption is that FDI from North to South occurs in an unskilled labor intensive production activity, but that activity is located in a sector that is relatively skill-intensive. It is shown that FDI leads to an increase in the relative wage of skilled labor in both North and South. It is also found that FDI may increase unemployment of unskilled labor in the South.

Keywords: FDI; Relative wage; North-South trade; Vertical integration; Arms-length trading (search for similar items in EconPapers)
JEL-codes: F12 F16 F21 F23 J31 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2003-08
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:alo:isipdp:03-03

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