Does foreign direct investment affect wage inequality in Chinese manufacturing sector?

ABSTRACT

Using panel data from 26 industries in the Chinese manufacturing sector from 2002 to 2016, this study examines the impact of foreign direct investment (FDI) on wage inequality. We find that on average, 1% increment in FDI significantly increased wage inequality by 0.112%. Moreover, the study concludes that the relationship between FDI and wage inequality is nonlinear. Furthermore, in the subsample analysis, scale and R&D investment of the industries is strongly related to wage inequality.

KEYWORDS:

• FDI
• wage inequality
• manufacturing sector
• financial crisis

JEL CLASSIFICATION:

• F21
• J31
• F43

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by the National Social Science Fund of China in 2019 [Grant No. 19BJY197].