Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81163
Authors: 
Braconier, Henrik
Norbäck, Pehr-Johan
Urban, Dieter
Year of Publication: 
2002
Series/Report no.: 
IUI Working Paper 579
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.
Subjects: 
Multinational Firms
Skilled-Wage Premium
New Trade Theory
JEL: 
F13
F23
J31
Document Type: 
Working Paper

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