Vertical FDI Revisited

Henrik Braconier, Pehr-Johan Norbäck and Dieter Urban
Additional contact information
Henrik Braconier: National Institute of Economic Research, Postal: P.O. Box 3116, SE-103 62 Stockholm, Sweden

No 579, Working Paper Series from Research Institute of Industrial Economics

Abstract: This study explores how relative skilled-wage premia affect FDI. Contrary to previous studies based on factor endowment differences, we find strong support for vertical FDI, in the sense that more FDI is conducted in countries where unskilled labor is relatively cheap. In addition, we find t hat relative skill-premia also affect FDI activities that have previously been associated with horizontal FDI, i.e. local affiliate sales. Consequently, the potential effects of changes in the relative wage costs on international production reallocation within MNEs are large. In fact, if not for the 8% rise in the US skilled wage premium relative to the average host country between 1986-1994, annual US affiliate sales abroad in relation to US GDP would have been half a percentage point higher.

Keywords: Multinational Firms; Skilled-Wage Premium; New Trade Theory (search for similar items in EconPapers)
JEL-codes: F13 F23 J31 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2002-04-26
New Economics Papers: this item is included in nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
https://www.ifn.se/Wfiles/wp/WP579.pdf (application/pdf)

Related works:
Working Paper: Vertical FDI Reviseted (2002)
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:hhs:iuiwop:0579

Access Statistics for this paper

More papers in Working Paper Series from Research Institute of Industrial Economics Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Elisabeth Gustafsson ().