Foreign direct investment and the gender wage gap: Evidence from China

Abstract

Using national survey data from the Chinese Household Income Project and regional official data, this study examines the impact of foreign direct investment (FDI) on the gender wage gap in China from 2002 to 2018. Four findings emerge. First, FDI, measured as working in foreign-invested enterprises (FIE) and regional FDI rate, significantly increases the wage level. Second, the gender difference in wage return to FIE differs by industrial sector: It is significant in the service sector while insignificant in the manufacturing sector. Third, the decomposition results indicate that both gender differences in FIE employment (endowment effect) and wage return to FIE (price effect) widen the wage gap, while both effects of regional FDI reduce the wage gap. Lastly, both the endowment and price effects of regional FDI contribute to reducing the wage gap in each ownership sector, while the price effect is greatest for FIEs.