Foreign Investment And China's Ownership Wage Differentials

Due to China's rapid growth of FDI inflows in the past decades, many researchers have investigated the economic consequences of FDI in China, especially focusing on the impacts of FDI on China's economic growth, technological change and wage gap. This paper emphasizes the effect of ownership differences on wage in China, while analyzing the relations of FDI, the ownership differences in labor price and other variables.Firstly, this paper adopts 29 China's provinces' data (except for Tibet, Qinghai) during the period of 1998-2006 for econometric analysis. It focuses on the influence of the ownership differences in labor price from FDI. It comes to the conclusion that the entry of FDI can significantly reduce the labor price differences of foreign units and state-owned unit, but can not necessarily reduce the labor cost differences of foreign-funded units and non-state-owned unit. At the same time, because of the differences of Hong Kong, Macao, Taiwan investment units and foreign investment units, FDI inflows of regional differences, we divide the samples into different sub-samples. Then we do the panel data analysis separately with the same methods. Finally the paper summarizes the conclusions and proposes the corresponding policy recommendations.