EFFECTS OF FOREIGN DIRECT INVESTMENT ON WAGES IN THE MANUFACTURING SECTOR, 2002-2008

Abstract: The purpose of the present thesis is to analyze the effects of FDI on wages in the manufacturing sector from 2002-2008 in 33 different countries. The introductory chapter will review existing literature, distinguishing between neoclassical, political economy and sociology approaches. A second part will estimate the effects of FDI on wages using the panel ordinary least squares (OLS) fixed effects method. Variables included to explain effects on wages, comprise: employment, inward FDI flows and stock, domestic capital, education and trade openness. Two sources are used to obtain international manufacturing wages’ data: International Labour Organization (ILO, 2012) and the United Nations Industrial Development Organization (UNIDO, 2012). The main contribution of this master thesis is its estimation of the effects of FDI on wages in the manufacturing sector for both developing and developed countries, with the use of actual FDI data in the manufacturing sector. As a result, this master thesis will enable the reader to understand the effects of FDI on workers' wages in the manufacturing sector.