| The effect of FDI on wage inequality in host country has been always a very important issue in the field of labor economics and development economics,and many theoretical and empirical studies have analyzed on it.Large influxes of foreign capital’s direct effects include the increase in capital stock,creating more job opportunities,and the indirect effects include improving domestic firms’ technical skill through technology spillover,as well as additive effect include having effect on wage inequality in host country.Many researchers have pointed out that foreign firms provide higher wage than domestic firms because of foreign firms’ strong presence in capital and technical,and our empirical result shows that foreign companies paid an average of about 5.76% higher wages than domestic companies after controlling for enterprise scale,productivity,profits,per capital investment,industry,and location by using Chinese manufacturing enterprises database.Which arising from this result is whether FDI is a major cause of wage inequality in China? How much contributions of FDI to wage inequality in China? Whether the effects of FDI on wage inequality have changed over the past years? Is the wage determining system of domestic firms the same with foreign firms’.The main objective of this paper is to investigate the effects of FDI on wages gap in host country.Two mechanisms through which FDI impacts wage gap in host country can be identified from the existing body of literature: labor transfer and technology spillover.In this paper,we have set up a model that includes these two mechanisms to analyze the effects of FDI on wage gap.Theoretical model result shows that the combined effect of foreign investment leads to the expansion of the wage gap between two sectors first and then narrows it,that is,its contribution to the wage gap of the host enterprises is an inverted U-shaped process.Using Chinese micro-level data,the paper carries on empirical tests on the effects of FDI on wage inequality in China,mainly include:(1)the paper calculates contributions of relevant factors,particularly FDI,to wage inequality in enterprise-level by using the regression-based decomposition approach(Shapley value).Empirical analysis shows FDI has great influence on China’s wage inequality which contributed over 10 percent to the wage gap,however,there is a sharp decline in the overall trend.The result of quantile regression shows that the main determinants which affect the wage level of foreign firm and domestic firm across the wage distribution are different.The results of Oaxaca-Blinder decomposition and quantile regression decomposition show that wage in foreign firm is remarkably higher than domestic firm for the years 1999-2007,and the effect of enterprise characteristics contributes to minor wage differentials between foreign firm and domestic firm.Moreover,the reduction of wage differentials at the high end of wage distribution is the major cause of the decline of wage differentials between foreign firm and domestic firm.(2)By using threshold regression model,empirical analysis show that there are three threshold values of technology gap that FDI’s technology spillover presents non-linear evolutionary process,the narrower the technology gap between foreign firms and domestic firms,the bigger the technology spillover from foreign firms.An empirical analysis on the trend of technology gap between foreign firms and domestic firms turns out that the trend of technology gap is contracting,which means technology spillover from foreign firms is more and more bigger.Therefore,technology spillover from foreign firms has positive effects on improving the wage level of domestic firms and negative effects on wage gap between foreign firms and domestic firms.Meanwhile,the paper calculates the contribution of technology spillover to inter-industry wage gap by using the regression-based decomposition approach(Shapley value).(3)Fitting prediction result based on industrial statistical data shows that the proportion of the workers in foreign firms to the workers in domestic firms is getting bigger along with the foreign capital has increased continuously,which leads to the narrower of wage gap between foreign firms and domestic firms.The results of simultaneous system of equations estimation also show that wage gap between foreign firms and domestic firms is getting smaller along with the larger the scale of foreign capital.By using region statistical data,the paper gets the similar results.(4)The paper analyzes the effects of enterprise heterogeneity on wage inequality by using propensity score matching from the perspective of export.The results show that there is no obvious wage difference between foreign export firms and foreign non-export firms,and the wage of domestic export firms is higher than domestic non-export firms,as well as foreign export firms’ wage level is much higher than domestic export firms.According this paper’s conclusions,in order to narrow the wage inequality of China,some measures should be taken in the future which include: focusing on the quality of foreign investment,refining the current labor market,improving the technology skill of domestic firms,balancing development of interregional,establishing market-based wage determining system in domestic firms. |
