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Winners and Losers of Multinational Firm Entry into Developing Countries: Evidence from the Special Economic Zones of the People’s Republic of China

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Abstract

This paper examines the impact of multinational firm entry into local labor markets on employment, productivity, and wages. It exploits the People’s Republic of China’s rapid implementation of economic reforms and assignment of cities to special economic zone status in the 1980s and 1990s. Using data on both firms and workers, it is found that these policies increased foreign direct investment, which raised average labor productivity in these labor markets. However, only modest increases in real median wage rates across these cities are observed in the face of large increases in wage inequality and rising local prices, limiting the benefits to most workers in these cities. Evidence is presented that corporate profits captured most of the increase in productivity in these areas.

Suggested Citation

  • Ebenstein, Avraham, 2012. "Winners and Losers of Multinational Firm Entry into Developing Countries: Evidence from the Special Economic Zones of the People’s Republic of China," Asian Development Review, Asian Development Bank, vol. 29(1), pages 29-56.
    • Handle: RePEc:ris:adbadr:2736
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    Cited by:

    1. Oliver Klein & Piotr Pachura & Christine Tamasy, 2016. "Globalizing Production Networks," Polish Journal of Management Studies, Czestochowa Technical University, Department of Management, vol. 13(2), pages 81-89, June.
    2. Ronald B. Davies & Rodolphe Desbordes, 2018. "Export Processing Zones and the Composition of Greenfield FDI," Working Papers 201807, School of Economics, University College Dublin.
    3. Ronald B. Davies & Arman Mazhikeyev, 2019. "The Impact of Special Economic Zones on Exporting Behavior," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 11(1), pages 145-174, July.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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