Foreign direct investment and employee income share: Firm-level evidence

This paper explores the impact effect of foreign direct investment on the share of employee salary income at the firm-level in China. We find that: 1) FDI raises the share of employee salary income on average; 2) FDI raises the number of patents and total factor productivity, reflecting the promotion of technological advancement, which in turn raises the share of employee compensation income; and 3) macroeconomic downward pressure and industry market competition reinforces the effect of FDI on the increase of the share of employee compensation income. Our finding provide important policy implications for further enhancing the openness and internationalization.