The Joint Research Centre of the European Commission has recently launched the following Working Paper: “Inward greenfield FDI and patterns of job polarization” by Sara Amoroso and Pietro Moncada-Paternò-Castello.
The unprecedented growth in FDI in the last decades has caused drastic changes in the labour markets of the host countries. The major part of FDI takes place in low tech industries, where the wages and skills are low, or in high tech, where they offer a wage premium for the highly skilled workers. This mechanism may increase the polarization of employment into high-wage and low-wage jobs, at the expenses of middle-skill jobs. This paper looks at the effects of two types of FDI inflows, namely foreign investment in high-skill and low-skill activities, on skill polarization. They match data on greenfield FDI aggregated by country and sector with data on employment by occupational skill to investigate the extent to which differ types of greenfield FDI are responsible for skill polarization.
Read the full paper here.