State-level FDI and within-occupation wage inequality in the United States

ABSTRACT

Our paper explores the relationship between inward foreign direct investment (FDI) and within-occupation wage inequality at the state level in the U.S. We argue that sectoral FDI may affect different occupations differently, and our study looks at possible heterogeneous effects of sectoral FDI on wage inequality for 22 occupations. Using data over 1999–2007, our results show that state-level manufacturing FDI tends to reduce wage inequality, measured by the ratio of the 90th percentile wage and the 10th percentile wage in an occupation. Manufacturing FDI is significantly associated with less wage inequality in the production occupations and the construction and extraction occupations. In contrast, non-manufacturing FDI is associated with increased within-occupation wage inequality in the arts, design, entertainment, sports, and media occupations, as well as the transportation and material moving occupations. Non-manufacturing FDI is associated with decreased wage inequality in the sales and related occupations.

KEYWORDS:

• Foreign direct investment
• within-occupation income inequality
• manufacturing FDI
• non-manufacturing FDI

JEL CLASSIFICATION:

• F10
• O10

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ A few notable exceptions include Blonigen and Figlio (2000), Bode, Nunnenkamp, and Waldkirch (2012), Ford and Rork (2010), Mullen and Williams (2007), and Zhuang (2013).