Labour Cost &Foreign Direct Investment-Evidence from India
Published: 2011
Author(s) Name: Yu-Cheng Lai & Santanu Sarkar
Locked
Subscribed
Available for All
Abstract
This study measures the effect of
labour cost on foreign direct investment
in India and finds out whether
the foreign owned firms pay higher
wages than their domestic counterparts.
The estimation has been done
by the Ordinary Least Square (OLS)
technique. Data suggest that after
controlling the output, the lower average
wage attracts foreign investment
in a firm implying that India
enjoys comparative advantages of
low labour cost which enables her
to lead in product competition globally.
Second, Indian firms will have
efficiency wage to encourage employees
to produce higher output. In
addition, the foreign owned firms in
India pay higher wages than their
domestic counterparts. The firms
with higher ratio of foreign ownership
pay more wages than the firms
having lower ratio.
View PDF