The Impact of Outward FDI on the South Korean Labor Market: Evidence on the Wages of Four Types of Workers

• Main Authors: Hongshik Lee, Hongmin Kim, Soonhyung Sim
• Format: Article
• Language: English
• Published: Korea Institute for International Economic Policy 2014-03-01
• Series: East Asian Economic Review
• Subjects: FDI; Skill-intensity; Contract Types; Wage Inequality
• Online Access: http://dx.doi.org/10.11644/KIEP.JEAI.2014.18.1.274
• ISSN: 2508-1640; 2508-1667

The purpose of this research is to identify the relation between OFDI (Outward Foreign Direct Investment) and wage inequality. In order to analyze various effects of OFDI on wages depending on the types of workers, the research classified laborers into four categories: permanent/skilled worker, permanent/unskilled worker, temporary/skilled worker, and temporary/unskilled worker. With controlling wage- determining factors such as education, labor union, individual fixed-effect, and industry-level effect, this paper examines whether OFDI attributes to the wage inequality among each type of workers. Moreover, this study also analyzes possible effects on wages that could vary according to the different characteristics of investments by classifying OFDI into two groups: OECD and non-OECD. The results reveal that OFDI makes certain differences according to skill-intensity and contract type in terms of influences on wages. It also shows that the effect of OFDI on wages is more subject to contract type than to skill-intensity. The classification of OFDI into OECD and non-OECD proves that effects on wages can vary by characteristics of the subject of investment.