Foreign direct investment and wage inequality: Evidence from China

Zhihong Chen; Ying Ge; Huiwen Lai

doi:10.1016/j.worlddev.2010.12.006

Foreign direct investment and wage inequality: Evidence from China

Zhihong Chen, Ying Ge, Huiwen Lai

Research output: Journal article publication › Journal article › Academic research › peer-review

76 Citations (Scopus)

Abstract

This study provides micro-level evidence on the close link between foreign participation and wage inequality. We investigate the wage premium and the wage spillover effect of foreign-invested enterprises in the Chinese manufacturing sector. The results indicate a significant foreign premium in both wage and non-wage compensation. The presence of foreign and Hong Kong, Macao and Taiwan (HMT) investment results in a significantly negative spillover in terms the wage level in domestic firms, and discourages wage growth in such firms. Overall, the evidence suggests that exposure to foreign investment increases inter-enterprise wage inequality.

Original language	English
Pages (from-to)	1322-1332
Number of pages	11
Journal	World Development
Volume	39
Issue number	8
DOIs	https://doi.org/10.1016/j.worlddev.2010.12.006
Publication status	Published - 1 Aug 2011

Keywords

Asian
China
Globalization
Inequality
Wage

ASJC Scopus subject areas

Economics and Econometrics
Development
Geography, Planning and Development
Sociology and Political Science

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.worlddev.2010.12.006

Cite this

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AB - This study provides micro-level evidence on the close link between foreign participation and wage inequality. We investigate the wage premium and the wage spillover effect of foreign-invested enterprises in the Chinese manufacturing sector. The results indicate a significant foreign premium in both wage and non-wage compensation. The presence of foreign and Hong Kong, Macao and Taiwan (HMT) investment results in a significantly negative spillover in terms the wage level in domestic firms, and discourages wage growth in such firms. Overall, the evidence suggests that exposure to foreign investment increases inter-enterprise wage inequality.

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KW - Globalization

KW - Inequality

KW - Wage

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Foreign direct investment and wage inequality: Evidence from China

Abstract

Keywords

ASJC Scopus subject areas

UN SDGs

More information

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