Despite the increased attention on the impacts of globalisation, there has been little empirical investigation into the impact of multinational firms on the domestic labour market and in particular wage inequality, this is in spite of a rapid increase in foreign direct investment (FDI) at around the same time of rising inequality. Using UK panel data, this paper tests whether inward flows of FDI have contributed to increasing wage inequality. Even after controlling for the two most common explanations of wage inequality, technology and trade, we find that FDI has a significant effect upon wage inequality, with the overall impact of FDI explaining on average 11% of wage inequality. © 2003 Elsevier B.V. All rights reserved.
Bibliographical noteNOTICE: this is the author’s version of a work that was accepted for publication in Labour economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Taylor, K & Driffield, N, 'Wage inequality and the role of multinationals: evidence from UK panel data' Labour economics, vol 12, no. 2 (2005) DOI 10.1016/j.labeco.2003.11.003
- FDI spillovers
- wage inequality