Wage implications of foreign direct investment with salary adjustment process
Author(s)
Advisor
Kara, TarıkDate
2012Publisher
Bilkent University
Language
English
Type
ThesisItem Usage Stats
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Abstract
The main objective of this thesis is to analyse theoretically the implications
of increasing foreign direct investment (FDI) on the wages of workers and on
the profits of firms in the local country which is previously studied in Saglam
and Sayek (2011). In this study, we modify the Kelso and Crawford’s salary
adjustment process. Firstly, capacity constraint of firms is introduced into
the Kelso and Crawford’s salary adjustment process. Secondly, we study the
process where workers make offers. Existence of stable matching is explored.
In the process where firms offer, the matching converges to a stable matching
but in the process where workers offer, stability may not hold.
While analysing the implications of increasing FDI on the wages and on
the profits in the local country, we use the firm-proposing salary adjustment
process with capacity constraint. Our analysis shows that under certain assumptions
workers and foreign firms benefit from increasing presence of foreign
direct investment while domestic firms may lose profits.