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Do Multinationals Promote Better Pay and Working Conditions?

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Foreign direct investment (FDI) by OECD‐based multinational enterprises (MNEs) in developing and emerging economies has increased dramatically over the past two decades. While generally perceived as beneficial for local development, it has also raised concerns about unfair competition and the protection of workers' rights in host countries. This chapter assesses the effects of FDI on wages and working conditions for workers of foreign affiliates of MNEs and those of their independent supplier firms. The evidence suggests that MNEs tend to provide better pay than their domestic counterparts, especially when they operate in developing and emerging economies, but not necessarily better non‐wage working conditions. The effects on wages may also spread to the foreign suppliers of MNEs, but those spillover effects are small.

Document Type: Review Article

Publication date: July 1, 2008


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