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The Impact of Foreign Direct Investments on Labour Productivity: A review of the Evidence and Implications

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Author(s): Raluca Georgiana Popescu (Robu)

Journal: The Romanian Economic Journal
ISSN 1454-4296

Volume: XIII;
Issue: 36;
Start page: 137;
Date: 2010;
Original page

Keywords: foreign investments | labour productivity | spillovers

ABSTRACT
The paper presents several results concerning the impact of foreign direct investments on labour productivity in different countries. The focus is on the labour productivity differences that exist between the foreign and domestic companies and on the way these differences evolve in the host country. Results show that national companies generally increase their labour productivity due to the technological and managerial competences that they borrow from the foreigncompanies established in their country and also because: firstly they have to protect themselves from the new competition and secondly they must comply with the growing demand coming from the new investors. Due to their higher labour productivity, foreign firms offer higher wages to their employees. This also determines a growth in the salaries of national companies’ skilled workers. Therefore the wage inequalities and skill differences grow in countries that receiveFDI, as to resume the critics. However the overall effect of a growing productivity is most oftenly translated into job creation and regional development.
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