GP - FDI Labor Market & Welfare Flashcards
what is the expected impact of FDI on labor markets in the host country?
positive impact through decrease of unemployment and higher salaries
BUT: higher demand for skilled labor can enhance wages inequalities
AND: delocalisations of low skills jobs through low cost region (job loss and wage stagnation forlower-skilled people working in the higher-cost region)
what change can FDI in developping countries faciliate?
transition of labor from agriculture to service
impact of FDI on the social welfare of host countries
-> complex and ambivalent
FDI can - improve macroeconomic conditions such as wages and market competetiveness
- but also exacerbate inequalities with skilled employment and thereforeimbalance income distribution
FDI and GDP per capita growth in the host country, how is the relation?
postive relationship between FDI and GDP per capita, suggesting that economically growing countries attract more foreign investment
FDI and Employment
positive correlation, but depending on the type of investment and other economic factors beyonf FDI!
Pattern of FDI and inequality
non-linear realtionship, suggesting that after a certain point FDI may increase inequality rather than reducing it
is there a sectoral difference of FDI impact?
FDI positively impacts the agricultural and service sectors,but negatively affects the industrial sector
agriculture and service: labor-intense so FDI can quickly
generate new jobs while the industrial sector high inital costs, existing competition and domestic industry policies
what is the impact FDI has on female labor market?
FDI benefits female labor market, but negatively in the industrial and service sectors
+ improvents in these sectors may drive women out of the market due to gender-biased skill gaps
conclusion
even though FDI might improves labor market, it also leads to welfare losses due to uneuqal and gender-biased effects
