Project number: PD138497

The aim of this project is to investigate the effect of foreign direct investment (FDI) on labor market inequality in the host country. The research examines how different subgroups of workers are affected by the presence of FDI and investigates the importance of differences in the workers’ human capital in this process. The project focuses on two main and less studied aspects of human capital: (i) worker’s skills/tasks and (ii) health. On the one hand, foreign firms may favor workers with different skill sets than domestic firms due to differences in technologies or managerial practices. For example, more automated plants enable them to hire workers with less physical strength. On the other hand, foreign investment is coming from different countries with different cultural norms. Besides bringing their superior technologies, foreign investors can bring the cultural norm of their home country with them and this can affect their hiring strategy and the wage structure of the firm. For example, investors from more gender-equal societies (e.g. Scandinavian countries) will eliminate gender discrimination at their affiliates by hiring more female workers and increasing their wages. In the proposed research project, I aim to give pieces of evidence of these mechanisms.