The effect of foreign affiliate employment on wages, employment, and the wage share in Austria.

This paper estimates the effects of outward Foreign Direct Investment (employment in the affiliates abroad) on employment, wages, and the wage share in Austria using panel data for the period of 1996-2005. There is evidence of significant negative effects of FDI on both employment and wages, and consequently on the wage share. The results are not limited to workers in low skilled sectors. The negative employment effect is mainly due to the rise in the employment in the foreign affiliates in Eastern Europe. The negative wage effects are originating from affiliate employment in both the East and the developed countries in the industry, but FDI in the East has positive wage effects in the services sector due to possible scope effects.

Pre-refereed version as permitted by publisher.