The impact of foreign direct investment on gender inequality in India

Abstract

This paper examines the effect of foreign direct investment (FDI) on female employment and wages in India. Using both household-level and plant-level data, it estimates the impact of industry-level FDI inflows on employment, wages and the gender wage gap for skilled and unskilled female workers. Further, it estimates whether there are any “cultural transfers” or spillovers in terms of gender norms from more gender-equal countries through this FDI. In order to estimate this, a weighted industry-level Gender Inequality Index (GII) is created. The main findings are that although FDI leads to an increase in employment of unskilled female workers, it worsens the gender wage gap. Further, there is no strong evidence of cultural spillovers to skilled female workers. This may be explained by the fact that multinational enterprises choose to adopt local institutions in order to be successful in developing-country markets, thereby losing some of their ownership advantages.