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Pittiglio, Rosanna
Reganati, Filippo
Sica, Edgardo
Year of Publication: 
Series/Report no.: 
FIW Working Paper No. 99
The present paper aims to test the impact of incoming Foreign Direct Investment (FDI) on local wages in the Italian manufacturing sector by using firm level data from 2002 to 2007. Results initially show the lack of wage spillovers at both horizontal and vertical level, meaning that the effects of foreign investment are completely internalized within each firm. However, when the technology gap is taken into account, we find some evidence of a non-linear relationship between gap size and wage spillover. In particular, if the technological gap between local firms and foreign companies is too large, Multinational Enterprises (MNEs) face some difficulty in interacting with domestic suppliers and customers, with the consequence that they act like monads within the host country. We therefore believe that policies favouring the attraction of inward investments, should not be of the ‘one for all' or ‘one for always' type, but must be strongly directed towards the sectoral and local characteristics of the host country.
Foreign Direct Investment
Multinational Enterprises
Horizontal Wage Spillovers
Vertical Wage Spillovers
Technological Gap
Document Type: 
Working Paper

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