IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v55y2023ipas1544612323002659.html
   My bibliography  Save this article

Foreign direct investment and employee income share: Firm-level evidence

Author

Listed:
  • Feng, Ya
  • Wen, Junqi

Abstract

This paper explores the impact effect of foreign direct investment on the share of employee salary income at the firm-level in China. We find that: 1) FDI raises the share of employee salary income on average; 2) FDI raises the number of patents and total factor productivity, reflecting the promotion of technological advancement, which in turn raises the share of employee compensation income; and 3) macroeconomic downward pressure and industry market competition reinforces the effect of FDI on the increase of the share of employee compensation income. Our finding provide important policy implications for further enhancing the openness and internationalization.

Suggested Citation

  • Feng, Ya & Wen, Junqi, 2023. "Foreign direct investment and employee income share: Firm-level evidence," Finance Research Letters, Elsevier, vol. 55(PA).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323002659
    DOI: 10.1016/j.frl.2023.103893
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612323002659
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2023.103893?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Kong, Qunxi & Peng, Dan & Ni, Yehui & Jiang, Xinyue & Wang, Ziqi, 2021. "Trade openness and economic growth quality of China: Empirical analysis using ARDL model," Finance Research Letters, Elsevier, vol. 38(C).
    2. David Autor & David Dorn & Lawrence F Katz & Christina Patterson & John Van Reenen, 2020. "The Fall of the Labor Share and the Rise of Superstar Firms [“Automation and New Tasks: How Technology Displaces and Reinstates Labor”]," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(2), pages 645-709.
    3. Fatih Guvenen & Raymond J. Mataloni Jr. & Dylan G. Rassier & Kim J. Ruhl, 2022. "Offshore Profit Shifting and Aggregate Measurement: Balance of Payments, Foreign Investment, Productivity, and the Labor Share," American Economic Review, American Economic Association, vol. 112(6), pages 1848-1884, June.
    4. Contractor, Farok J. & Dangol, Ramesh & Nuruzzaman, N. & Raghunath, S., 2020. "How do country regulations and business environment impact foreign direct investment (FDI) inflows?," International Business Review, Elsevier, vol. 29(2).
    5. Rodolphe Desbordes & Loe Franssen, 2019. "Foreign Direct Investment and Productivity: A Cross-Country, Multisector Analysis," Asian Development Review, MIT Press, vol. 36(1), pages 54-79, March.
    6. Ramachandran, Renjith & Sasidharan, Subash & Doytch, Nadia, 2020. "Foreign direct investment and industrial agglomeration: Evidence from India," Economic Systems, Elsevier, vol. 44(4).
    7. Dongya Koh & Raül Santaeulàlia‐Llopis & Yu Zheng, 2020. "Labor Share Decline and Intellectual Property Products Capital," Econometrica, Econometric Society, vol. 88(6), pages 2609-2628, November.
    8. Ceyhun Elgin, 2021. "Foreign direct investment, informality and technology transfer," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 994-1015, May.
    9. Hidehiko Matsumoto, 2022. "Foreign Reserve Accumulation, Foreign Direct Investment, and Economic Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 43, pages 241-262, January.
    10. Battisti, Michele & Giesing, Yvonne & Laurentsyeva, Nadzeya, 2019. "Can job search assistance improve the labour market integration of refugees? Evidence from a field experiment," Labour Economics, Elsevier, vol. 61(C).
    11. Hidehiko Matsumoto, 2022. "Foreign Reserve Accumulation, Foreign Direct Investment, and Economic Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 43, pages 241-262, January.
    12. Dong, Yan & Tian, Jinhuan & Ye, Jingjing, 2021. "Environmental regulation and foreign direct investment: Evidence from China's outward FDI," Finance Research Letters, Elsevier, vol. 39(C).
    13. Lorenzo Caliendo & Maximiliano Dvorkin & Fernando Parro, 2019. "Trade and Labor Market Dynamics: General Equilibrium Analysis of the China Trade Shock," Econometrica, Econometric Society, vol. 87(3), pages 741-835, May.
    14. Rong, Shu & Liu, Kai & Huang, Si & Zhang, Qi, 2020. "FDI, labor market flexibility and employment in China," China Economic Review, Elsevier, vol. 61(C).
    15. Wang, Hao & Fidrmuc, Jan & Tian, Yunhua, 2020. "Growing against the background of colonization? Chinese labor market and FDI in a historical perspective," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 1018-1031.
    16. Saša Jakšić & Nataša Erjavec & Boris Cota, 2019. "The role of foreign direct investment and labor productivity in explaining croatian regional export dynamics," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 27(3), pages 835-849, September.
    17. Dibyendu Maiti, 2019. "Trade, Labor Share, and Productivity in India’s Industries," ADB Institute Series on Development Economics, in: Gary Fields & Saumik Paul (ed.), Labor Income Share in Asia, chapter 0, pages 179-205, Springer.
    18. Hou, Lei & Li, Qi & Wang, Yanfei & Yang, Xintong, 2021. "Wages, labor quality, and FDI inflows: A new non-linear approach," Economic Modelling, Elsevier, vol. 102(C).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shi, Huaizhi, 2024. "Managerial ownership and labor income share," Finance Research Letters, Elsevier, vol. 62(PB).
    2. Zheng, Xiaxuan & Chen, Yueyan, 2024. "Does supply-chain-finance help to improve the efficiency of outward foreign direct investment?," Finance Research Letters, Elsevier, vol. 59(C).
    3. Yang, Gongyan & Yang, Yingqun & Tang, Tingfeng & Dai, Liyan, 2023. "Does China's aid boost firm performance in recipient countries?," Finance Research Letters, Elsevier, vol. 55(PB).
    4. Zhao, Shuai & Chen, Yan, 2024. "ESG rating and labor income share: Firm-level evidence," Finance Research Letters, Elsevier, vol. 63(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ian Goldin & Pantelis Koutroumpis & François Lafond & Julian Winkler, 2024. "Why Is Productivity Slowing Down?," Journal of Economic Literature, American Economic Association, vol. 62(1), pages 196-268, March.
    2. Yu, Fan & Zheng, Shilin & Zheng, Shuhong & Guo, Chenhao, 2024. "Does carbon ETS affect the distribution of labor's slice of the factor income pie? From the low carbon transition perspective," Energy Economics, Elsevier, vol. 134(C).
    3. Vallés, Javier & Salas Fumás, Vicente & San Juan, Lucio, 2022. "Corporate economic profits in the euro area: The relevance of cost competitive advantage," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 569-585.
    4. Matteo G. Richiardi & Luis Valenzuela, 2024. "Firm heterogeneity and the aggregate labour share," LABOUR, CEIS, vol. 38(1), pages 66-101, March.
    5. Eric Zwick, 2022. "Comment on "Human Capitalists" 2," NBER Chapters, in: NBER Macroeconomics Annual 2022, volume 37, pages 74-83, National Bureau of Economic Research, Inc.
    6. David M. Williams, 2021. "Pay and Productivity in Canada: Growing Together, Only Slower than Ever," International Productivity Monitor, Centre for the Study of Living Standards, vol. 40, pages 3-26, Spring.
    7. Gene M. Grossman & Elhanan Helpman & Ezra Oberfield & Thomas Sampson, 2017. "The productivity slowdown and the declining labor share: a neoclassical exploration," CEP Discussion Papers dp1504, Centre for Economic Performance, LSE.
    8. Heiland, Inga & Kohler, Wilhelm, 2022. "Heterogeneous workers, trade, and migration," European Economic Review, Elsevier, vol. 144(C).
    9. Corsetti, G. & Maeng, S. H., 2023. "The Theory of Reserve Accumulation, Revisited," Janeway Institute Working Papers 2319, Faculty of Economics, University of Cambridge.
    10. Wang Zhou & Shuyue Xia & Jinglei Ye & Na Zhang, 2024. "How Do International Contractors Choose Target Market Based on Environmental, Social and Governance Principles? A Fuzzy Ordinal Priority Approach Model," Sustainability, MDPI, vol. 16(3), pages 1-18, January.
    11. Kim, Jiwoon, 2021. "Wage negotiations in multi-worker firms and stochastic bargaining powers of existing workers," Journal of Economic Dynamics and Control, Elsevier, vol. 123(C).
    12. Guimarães, Luís & Mazeda Gil, Pedro, 2022. "Explaining the Labor Share: Automation Vs Labor Market Institutions," Labour Economics, Elsevier, vol. 75(C).
    13. Maarten de Ridder, 2022. "Market power and innovation in the intangible economy," POID Working Papers 064, Centre for Economic Performance, LSE.
    14. Thorsten Drautzburg & Jesús Fernández-Villaverde & Pablo Guerrón-Quintana, 2017. "Political Distribution Risk and Aggregate Fluctuations," Working Papers 17-25, Federal Reserve Bank of Philadelphia.
    15. 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.
    16. Philippe Aghion & Antonin Bergeaud & Timo Boppart & Peter J Klenow & Huiyu Li, 2023. "A Theory of Falling Growth and Rising Rents," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(6), pages 2675-2702.
    17. Francesca Crucitti & Lorenza Rossi, 2022. "Labor Share Decline and Productivity Slowdown: A Micro-Macro Analysis," Working Papers 350577481, Lancaster University Management School, Economics Department.
    18. Emilien Gouin-Bonenfant, 2018. "Productivity Dispersion, Between-firm Competition and the Labor Share," 2018 Meeting Papers 1171, Society for Economic Dynamics.
    19. Wen Chen & Bart Los & Marcel P. Timmer, 2017. "Factor Incomes in Global Value Chains: The Role of Intangibles," NBER Chapters, in: Measuring and Accounting for Innovation in the Twenty-First Century, pages 373-401, National Bureau of Economic Research, Inc.
    20. Roya Taherifar & Mark J. Holmes & Gazi M. Hassan, 2023. "The drivers of labour share and impact on pay inequality: A firm-level investigation," Working Papers in Economics 23/03, University of Waikato.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323002659. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.