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Do Multinational Enterprises Push up the Wages of Domestic Firms in the Italian Manufacturing Sector?*

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Abstract

This paper investigates the impact of incoming foreign direct investment on local wages in the Italian manufacturing sector. We find that wage spillovers take place mainly when the technological gap between domestically owned firms and foreign-owned firms is large. Specifically, a large technological distance between domestically owned and foreign-owned firms has positive effects on wages paid by domestically owned firms in the same industry and negative on domestic wages in upstream and/or in downstream industries. Finally, inward investment may indeed improve the domestic sectors, although such linkage depends on different characteristics of domestically owned firms and sectors where firms operate.

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