Foreign direct investment and wage spillovers in Vietnam

Abstract

This paper examines the impact of FDI on wages paid by domestic private firms in Vietnam. The existing literature has examined the impact of foreign firms on domestic firms’ wage levels within an industry. We expand on the literature by examining inter-industry linkages as an additional conduit for wage spillovers. There is strong evidence of horizontal wage spillovers from foreign firms to domestic private firms in Vietnam, despite different labour market conditions and firms’ characteristics. Vertical wage spillovers exist, but depend on the specific characteristics of firms and industries. A further finding is that training activities facilitate wage spillovers.