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Labor Markets and the Demand for Foreign Direct Investment

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  • Pandya, Sonal S.

Abstract

Existing research on foreign direct investment (FDI) focuses on how politics influences the supply of FDI inflows. In this article I shift focus to the demand for FDI inflows within recipient countries by examining individual preferences for FDI. I argue that FDI preferences are largely a function of FDI's effects on income. FDI raises wages, especially those of skilled labor because foreign firms require more highly skilled labor than their local counterparts. Accordingly, support for FDI should increase with respondents' skills. Using three years of extensive public opinion data from eighteen Latin American countries, I provide robust evidence that preferences are consistent with FDI's effects on income. There is relatively little support for alternate explanations including concerns about job security, opposition to privatization, and the socializing effects of higher education on economic policy preferences.

Suggested Citation

  • Pandya, Sonal S., 2010. "Labor Markets and the Demand for Foreign Direct Investment," International Organization, Cambridge University Press, vol. 64(3), pages 389-409, July.
    • Handle: RePEc:cup:intorg:v:64:y:2010:i:03:p:389-409_00
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    Cited by:

    1. François, Abel & Méon, Pierre-Guillaume, 2021. "Politicians at higher levels of government are perceived as more corrupt," European Journal of Political Economy, Elsevier, vol. 67(C).
    2. Lukas Linsi, 2022. "Economic Narratives and the Legitimacy of Foreign Direct Investments," Politics and Governance, Cogitatio Press, vol. 10(3), pages 98-109.
    3. Cooray, Arusha & Tamazian, Artur & Vadlamannati, Krishna Chaitanya, 2014. "What drives FDI policy liberalization? An empirical investigation," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 179-189.
    4. Chiara Franco & Giovanni Marin & Filomena Pietrovito, 2023. "Exposure to FDI and attitudes towards multinational enterprises: Do M&A matter?," The World Economy, Wiley Blackwell, vol. 46(6), pages 1648-1669, June.
    5. Niaz Morshed & Mohammad Razib Hossain, 2022. "Causality analysis of the determinants of FDI in Bangladesh: fresh evidence from VAR, VECM and Granger causality approach," SN Business & Economics, Springer, vol. 2(7), pages 1-28, July.
    6. Eduardo Saucedo & Teofilo Ozuna & Hector Zamora, 2020. "The effect of FDI on low and high-skilled employment and wages in Mexico: a study for the manufacture and service sectors," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 54(1), pages 1-15, December.
    7. Louis Jaeck & Sehjeong Kim, 2018. "FDI Deregulation Versus Labor Market Reform: a Political Economy Approach," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 46(1), pages 73-89, March.
    8. Seok-ju Cho & Yong Kim & Cheol-Sung Lee, 2016. "Credibility, preferences, and bilateral investment treaties," The Review of International Organizations, Springer, vol. 11(1), pages 25-58, March.
    9. Faisal Z. Ahmed, 2017. "Remittances and incumbency: Theory and evidence," Economics and Politics, Wiley Blackwell, vol. 29(1), pages 22-47, March.
    10. Zenobia T. Chan & Sophie Meunier, 2022. "Behind the screen: Understanding national support for a foreign investment screening mechanism in the European Union," The Review of International Organizations, Springer, vol. 17(3), pages 513-541, July.
    11. Liam Kneafsey & Aidan Regan, 2019. "The Role of the Media in Shaping Attitudes Toward Corporate Tax Avoidance: Experimental Evidence from Ireland," Working Papers 201904, Geary Institute, University College Dublin.
    12. Matthew Amengual & Salo Coslovsky & Duanyi Yang, 2017. "Who opposes labor regulation? Explaining variation in employers’ opinions," Regulation & Governance, John Wiley & Sons, vol. 11(4), pages 404-421, December.
    13. Nita Rudra & Meir Alkon & Siddharth Joshi, 2018. "FDI, Poverty, and the Politics of Potable Water Access," Economics and Politics, Wiley Blackwell, vol. 30(3), pages 366-393, November.
    14. Nguyen, Quynh & Malesky, Edmund, 2021. "Fish or steel? New evidence on the environment-economy trade-off in developing Vietnam," World Development, Elsevier, vol. 147(C).
    15. Sera Linardi & Nita Rudra, 2015. "Globalization and Redistribution Towards the Poor in Developing Countries: Experimental Evidence from India," Artefactual Field Experiments 00399, The Field Experiments Website.
    16. Krishna Chaitanya Vadlamannati & Artur Tamazian, 2017. "Are Left-Wing Governments Really Pro-Labor? An Empirical Investigation for Latin America," Kyklos, Wiley Blackwell, vol. 70(1), pages 129-160, February.
    17. Hye‐Sung Kim & Youngchae Lee & Scott Huffmon, 2022. "Public opinion on U.S. investment in foreign countries: Survey evidence from 11 southern states in the United States," Social Science Quarterly, Southwestern Social Science Association, vol. 103(5), pages 1113-1124, September.

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