FDI and wages : evidence from a firm survey of FDI in Viet Nam; research report

Abstract

The worker survey carried out simultaneously with the firm survey under this project in 2007 produces an unparalleled database, which consists of 2,058 workers from 240 FDI and 130 non-FDI firms with provides extremely useful information for econometric analysis of wage gap between in FDI and non-FDI sectors. There are a number of useful findings that come out of this analysis. The results of data analysis show that there is difference in wages between workers in FDI and non-FDI sectors in favor of the former. This difference is mostly explained by differences in return to workers’ endowments especially return to education and high job position (i.e. management job). This result continues to hold we do regressions with firm characteristics and firm cluster effects being controlled for. This study shows that there is some evidence that FDI presence would work in favor of Vietnamese workers by raising wages and return to worker’s characteristics on the one hand and improve worker’s endowments through increased training and improved working conditions on the other hand. Furthermore, the appearance of FDI firms seem to also favor migrant workers, and lead to more competition for workers among firms, including domestic ones. This is likely to raise wages in the national labor market, which further benefits the working class.