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Foreign Direct Investment

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Foreign Direct Investment. Although foreign direct investment (FDI) contributes to growth in developing countries, there is evidence that the benefits are not equally distributed. Foreign-owned firms tend to pay higher wages in developing countries, but skilled workers tend to benefit more than less-skilled workers. This conclusion is based on new research conducted into the effects of FDI on wages in five East Asian economies and the effects of foreign ownership in five African countries. While FDI may support development in the aggregate, more attention should be focused on the distribution of gains from FDI, notably effects on wage inequality. "Foreign Direct Investment: Who Gains?" by Dirk Willem te Velde and Oliver Morrissey is published by the Overseas Development Institute.

 

By Overseas Development Institute, Hong Kong, South Korea, Singapore, Thailand, Philippines.

International Trade Policy Resource.