An Empirical Research On Wage Spillovers Of Foreign Direct Investment Base On Industry Characteristics

With the development of economic globalization, economic interdependence among nations has been deepened. The external effects which cause by foreign direct investment gain more and more concern. Wage spillovers effect, as an important branch in this field, has arisen widely attention of domestic and foreign scholars.This paper further analyses the mechanism system and influential factors of wage spillovers effect, which is based on carding domestic and foreign related research paper in this field. Using a panel data of 37 industrial branches form 2003 to 2007, this paper studies the impact of foreign direct investment on wages paid by domestic enterprises to their employees. The empirical evidence not only supports that the inflow of FDI could raise the average wages in industry as a whole, but also suggests that there is a significant positive spillover effect from FDI to state-owned enterprises'average wages. FDI-related wage spillovers can occur through two main channels: labor market dynamics and technology advancement bases on productivity spillovers. Industry characteristics are important in explaining this so-called FDI-related wage spillovers'differentials.Specifically, the results of testing impact of Herfindahl upon wage spillovers indicate that wage spillover effect decreasing as the degree of industry concentration was getting higher. The impact of FDI on wages paid by SOEs through these two channels is about equal when industry concentration is lower. However, wage spillovers through channel-technology advancement bases on productivity spillovers are more important as industry concentration increasing. Expansion of export orientation of foreign-funded enterprises plays an increasingly role in improving positive wage spillover. In foreign exporting establishments, wage spillovers base on labor market dynamics are more evident while the second channel is more obvious in foreign non-exporting establishments. On the other hand, wage spillovers are much more significant when technology gap between state-owned enterprises and foreign-funded enterprises is smaller. Wage spillovers base on labor market dynamics are more important when technology gap is small. Nevertheless, unlike the former wage spillovers occur chiefly through"productivity spillovers"in industry whose technology gap is larger. In addition, wage spillovers due to labor market dynamics are more marked in lower capital intensity industry. But while capital intensity is higher, wage spillovers to SOEs from FFEs(foreign-funded enterprises) are only evident through the second channel.