The Impact of Foreign Direct Investments on Labour Productivity: A Critical Examination of Results

Popescu, Raluca Georgiana
Publication date: 
JEL codes: 
F16 - Trade and Labor Market Interactions, F21 - International Investment; Long-Term Capital Movements, F23 - Multinational Firms; International Business, J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, O24 - Trade Policy; Factor Movement Policy; Foreign Exchange Policy.
The paper presents several results concerning the impact of foreign direct investments on labour productivity in different countries.The focus is on the labour productivity differences that exist between the foreign and domestic companies and on the way these differences evolve in the host country. Results show that national companies generally increase their labour productivity due to the technological and managerial competences that they borrow from the foreign companies established in their country and also because: firstly they have to protect themselves from the new competition and secondly they must comply with the growing demand coming from the new investors. Due to their higher labour productivity, foreign firms offer higher wages to their employees. This also determines a growth in the salaries of national companies’skilled workers going to wage inequalities and skill differences. However, the overall effect of a growing productivity is most oftenly translated into job creation.
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