A spatial analysis of inward FDI and urban–rural wage inequality in China |
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| Institution: | 1. School of Economics and Trade, Guangdong University of Foreign Studies, Guangzhou, 510006, China;2. School of Slavonic and East European Studies (SSEES), University College London (UCL), Bloomsbury, WC1H 0BW, United Kingdom;3. Université de Lille, CNRS, IESEG School of Management, UMR 9221 - LEM - Lille Économie Management, Lille, F-59000, France;4. PRIGO University, Havířov, Czech Republic;5. CESifo, Munich, Germany;6. Research Centre for Economic Analysis (RCEA), Italy;7. Global Labor Organization (GLO);8. Faculty of Economics, Guangdong University of Finance and Economics, Guangzhou, 510320, China |
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| Abstract: | This article investigates the spatial effect of inward foreign direct investment (FDI) on urban–rural wage inequality, both in the short and long run, by employing the Spatial Durbin Model. In particular, we carefully consider the heterogeneity of inward FDI with respect to its entry mode (ownership type) and sectoral distribution. Based on a panel dataset covering 30 provinces and cities in China from 2000 to 2016, our results show that inward FDI does not increase urban–rural wage inequality. In particular, we do not find a significant relationship between inward FDI in the secondary and tertiary sectors, while inward FDI in the primary sector has a slightly negative effect on inequality. When we consider inward FDI by entry mode, we find that wholly foreign-owned enterprises (WFE) have a negative spatial effect on urban–rural wage inequality in the short and long run, while equity joint ventures (EJV) reduce urban–rural inequality in the long run only. |
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| Keywords: | Spatial spillovers Foreign direct investment Urban-rural wage inequality SDM |
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