Foreign-Affiliate Activity and U.S. Skill Upgrading

Bruce Blonigen and Matthew J. Slaughter

No 7040, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: There has been little analysis of the impact of inward foreign direct investment (FDI) on U.S. wage inequality, even though the presence of foreign-owned affiliates in the United States has arguably grown more rapidly in significance for the U.S. economy than trade flows. Using data across U.S. manufacturing from 1977 to 1994, this paper tests whether inward flows of FDI contributed to within-industry shifts in U.S. relative labor demand toward more-skilled labor. We generally find that inward FDI has not contributed to U.S. within-industry skill upgrading; in fact, the wave of Japanese greenfield investments in the 1980s was significantly correlated with lower, not higher, relative demand for skilled labor. This finding is consistent with recent models of multinational enterprises in which foreign affiliates focus on activities less skilled-labor intensive than the activities of their parent firms. It also suggests that if inward FDI brought new technologies into the United States, the induced technological change was not biased towards skilled labor.

JEL-codes: F21 F23 (search for similar items in EconPapers)
Date: 1999-03
Note: ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Published as Blonigen, Bruce A. and Matthew J. Slaughter. "Foreign-Affiliate Activity And U.S. Skill Upgrading," Review of Economics and Statistics, 2001, v83(2,May), 362-376.

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