PUBLICATIONS & REPORTS

Contents Introduction

This paper examines whether foreign direct investment benefits workers employed by domestic companies in a host developing country. Using the key-industry hypothesis approach, the analysis shows that wages set by multinational companies have positive externalities on the wage level of domestic companies. Increased wages of domestic companies are due not only to increased productivity, but also to equity concerns. Specifically, fairness comparison plays an important role when there are larger wage gaps between multinational and domestic companies.