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Foreign direct investment and wage spillover in Thailand: Evidence from firm-level panel data

Sasiwimon Warunsiri Paweenawat (School of Economics, University of the Thai Chamber of Commerce, Bangkok, Thailand)

International Journal of Social Economics

ISSN: 0306-8293

Article publication date: 22 October 2019

Issue publication date: 22 October 2019

Abstract

Purpose

The purpose of this paper is to investigate whether foreign direct investment (FDI) benefitted Thai workers in domestic firms.

Design/methodology/approach

By utilizing existing firm-level unbalanced panel data from the survey of the Office of Industrial Economics, Ministry of Industry, Thailand, between 2004 and 2013, this study applies dynamic panel data analysis, using the generalized method of moments proposed by Arellano and Bond (1991), to estimate the wage spillover from multinational enterprises (MNEs) to domestic firms in Thailand.

Findings

The study reveals that there is a positive wage spillover from the presence of MNEs in the industry to domestic firms. Furthermore, a wage spillover also exists in the low-technology industry, as well as in firms located in the Metropolitan and Northern regions. These findings confirmed that FDI offers a significant advantage in Thailand’s labor market.

Originality/value

This study is the empirical research to utilize existing firm-level unbalanced panel data in Thailand, applying dynamic panel data analysis to data from 2004 to 2013 to estimate the wage spillover from MNEs to domestic firms.

Keywords

Acknowledgements

The author would like to thank the Office of Industrial Economics (OIE), Ministry of Industry, Thailand for the data and the University of the Thai Chamber of Commerce for funding this research project. The useful suggestions and comments from six anonymous reviewers are gratefully acknowledged.

Citation

Paweenawat, S.W. (2019), "Foreign direct investment and wage spillover in Thailand: Evidence from firm-level panel data", International Journal of Social Economics, Vol. 46 No. 10, pp. 1198-1213. https://doi.org/10.1108/IJSE-01-2019-0055

Publisher

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Emerald Publishing Limited

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