The Effect of Horizontal Spillovers from FDI on Average Wages: Evidence from Vietnamese Enterprises

Abstract

This study aims to find fresh evidences of the effects of horizontal spillover, trade orientation, and firm characteristics on real wages moderated by five categories of ownership. Based on an exploration of 2007–2015 Vietnamese firm-level data collected by the General Statistics Office of Vietnam, the findings reveal significantly positive effects of horizontal spillover and export orientation on average wages. In contrast, import orientation negatively affects wages. The results are supported by the literature of labor market competition and productivity improvement. Importantly, the effect of horizontal spillovers from FDI and trade on average wage varies significantly across ownership types. Although horizontal spillover and the gender ratio have no overall influence on average wages, they do have negative effects on wages in Vietnamese domestic private. Besides, the firm characteristics such as firms’ real output, capital intensity, market share, and net income are also important predictors for the rise of the firm-level average wage in Vietnam.