Trade and FDI Effect on Wages: Evidence from 20 OECD Countries

Abstract: This study analyzes trade and FDI effect on wages in the 20 OECD countries. These countries are divided into six samples according to their geographical position. Panel cointegration and panel OLS methods are conducted during the study. The empirical model is built up on the base of the study of Onaran and Stockhammer (2006). The panel cointegration results show that there is a long-run relationship between wages, trade, and FDI. The panel estimation results indicate that both trade and FDI have significant effects on wages. It is found that trade has positive effects on wages. Although FDI has a significant effect on wages, the sign of the effect differs among samples. Moreover, the size of the effect of the FDI appears quite small that FDI does not have an economically significant effect on wages.