FDI and Gender Wage Inequality

Abstract

In most countries, particularly the developing ones, gender differentials in labour markets are manifested in terms of a gap in relative wages among men and women workers. There are a few empirical studies that have examined the impact of FDI on the gender-based wage inequality, findings of which are mixed in nature. There may be two contrary effects of FDI on the gender wage differentials: on one hand, the gap may widen due to weakened bargaining power of women crowded in the MNCs, while on the other hand, the MNCs may reward the higher education levels of female workers, lowering the gender wage gap. While it is widely argued that foreign capital propels an economy towards the trajectory of growth, the objectives of an egalitarian welfare-maximizing state are fulfilled only if economic growth and welfare are accompanied by reduction in gender wage inequality. The analysis of this chapter shows that although FDI in countries with female labour-intensive export-oriented sectors may accentuate gender wage inequality, it may also raise the welfare of the economy. These results point towards a trade-off between gender wage inequality and welfare of the economy.