Vertical FDI Revisited

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IUI Working Paper ; No. 579

Classification and Topics

• Classification: Wirtschaft ; Trade Policy; International Trade Organizations ; Multinational Firms; International Business ; Wage Level and Structure; Wage Differentials
• Subject: Multinational Firms ; Skilled-Wage Premium ; New Trade Theory ; Direktinvestition ; Arbeitskosten ; Lohnstruktur ; Qualifikation ; Schweden ; USA ; Welt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Braconier, Henrik ; Norbäck, Pehr-Johan ; Urban, Dieter
• Event: Veröffentlichung
• (who): The Research Institute of Industrial Economics (IUI)
• (where): Stockholm
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/81163
• Last update: 10.03.2025, 11:41 AM CET