An Impact Study On Wage Spillovers Of Foreign Direct Investment In Local Enterprises Within The Industry

As the main form of international capital flows, the emergence and developmentof Foreign direct investment (FDI) had a major impact on all aspects of the host andhome countries and have been gradually gained wide attention.This paper studies foreign direct investment on the average wage of localenterprises in China (ie, domestic-funded enterprises). This paper based on the existedresearch results, taking a combination of qualitative and quantitative methods. First,analysis the theoretical basis and the implementation mechanism of the wage level ofthe host country of foreign direct investment. Find that foreign direct investmentaffects the wage level through labor market channels and technological progress.Then analyzes the difference of foreign direct investment on the capital of the averagewage level within industries and regions systematically.Through the use of statistics and quantitative methods, we found that the easternpart has the highest-funded enterprises of the wage and the highest FDI inflows, andthe wage levels of the technology-intensive industries and FDI inflows is highest. Onthis basis, we use Chinese industrial enterprises census database1998-2005, whichcontains manufacturing industry panel data, testing two ways of wage spilloversare ofChina’s foreign-funded enterprises. And take an empirical research on the impact ofwage levels by FDI, and analyze the difference of FDI inflows and average wage levelbetween different industries and different regions. The empirical results show that FDIhave a significant positive impact on inward owned enterprises wage. The easternpart’s.foreign-funded.enterprises.wages.spillovers.is.the.highest.technology-intensiveindustry, foreign-funded enterprises pay the highest spillover effects, followed bycapital-intensive industries and labor-intensive industries. Finally,combined theconclusions of the analysis in this article, give an relevant policy recommendations toimprove the wages of workers in China and how to use FDI effectively.This paper’s study the spillover effects of FDI on China’s local enterpriseswages,which provides a goodway to further our knowledge of China to attract foreigninvestment, and a reasonable utilization of foreign capital. At the same time, the studyof FDI is also beneficial to promote the harmonious and rapid development of China’seconomy.