Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/48282 
Year of Publication: 
2011
Series/Report no.: 
Proceedings of the German Development Economics Conference, Berlin 2011 No. 54
Publisher: 
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft, Kiel und Hamburg
Abstract: 
We address the effects of FDI on the labor share in developing countries. Our theory relies on the impacts of FDI on productive heterogeneity in a frictional labor market. FDI have two opposite effects: a negative force originated by technological advance, and a positive force due to increased labor market competition between firms. We test this theory on aggregate panel data through fixed effects and system-GMM estimations. We find a U-shaped relationship between the labor share in the manufacturing sector and the ratio of FDI stock to GDP. Most countries are stuck in the decreasing part of the curve.
Subjects: 
FDI
Matching frictions
Firm heterogeneity
Technological advance
JEL: 
E25
F16
F21
Document Type: 
Conference Paper

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