Inward Foreign Direct Investment and Inter-Industry Wage Differentials In U.S. Manufacturing Industries

Minsik Choi

Working Papers from Political Economy Research Institute, University of Massachusetts at Amherst

Abstract: This study investigates the effects of inward foreign direct investment on local workers’ wages by focusing on U.S. manufacturing industries for the period from 1987 to 1992. I use two different approaches to control individual characteristics and to implement estimation in this study: (1) One-step estimation with industry-state level of inward foreign direct investments, and (2) Two-step industry characteristic regression approach. I find that the higher presence of foreign firms is associated with higher local wages after workers’ observable characteristics are controlled for in cross-section analysis. However, I did not find a positive association between inward FDI activities and industry wage premiums within industry in a panel data analysis. In this analysis, inward FDI activities appeared to be negatively associated with worker’s industry wage premium for workers with more than high a school education.

Date: 2003
New Economics Papers: this item is included in nep-ifn
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