Foreign direct investment and factor prices in US manufacturing

Foreign Direct Investment and Factor Prices in U.S. Manufacturing. We investigate whether inward foreign direct investment (FDI) can explain part of the increase in relative wages of skilled workers in U.S. manufacturing over the period 1977-1994 by studying the sector bias of the effects of FDI on sector prices and technology. We follow the two-stage mandated-wage approach based on the Stolper-Samuelson theorem. We find that inward FDI affects the sum of sector prices and productivity depending on the absorptive capacity available in the sector. We also find some evidence that inward FDI has induced a sector bias towards using skilled workers over the period 1977-1994.