Job Quality, FDI and Institutions in Sub-Saharan Africa: Evidence from Firm-Level Data

Abstract

Using a unique sample of foreign-owned and domestic firms in Sub-Saharan Africa, we study the differences in the quality of jobs that they offer, and identify how these differences are associated with country-level institutional factors. We find that foreign-owned firms offer more stable and secure jobs than domestic firms, as evidenced by their higher and lower shares of permanent full-time and temporary employment, respectively. The job stability and security advantage of foreign-owned firms is smaller in countries with higher firing costs and better governance, where domestic firms are likely to offer more stable and secure jobs. In addition, foreign-owned firms are less likely to offer unpaid work and have a lower share of these workers. They also have a higher average training intensity and pay higher wages to different types of workers. The wage premia of foreign-owned firms are lower in countries with higher governance and social policy standards, where domestic firms are likely to pay higher wages. Finally, we show that the job quality advantage of foreign-owned firms depends on the location of their parents, the mode of their establishment, their main business purpose and the most critical investment incentive received from the host country.