FDI and Gender Wage Inequality

  • Sarbajit Chaudhuri
  • Ujjaini Mukhopadhyay


In most countries, particularly the developing ones, gender differentials in labour markets are manifested in terms of a gap in relative wages among men and women workers. There are a few empirical studies that have examined the impact of FDI on the gender-based wage inequality, findings of which are mixed in nature. There may be two contrary effects of FDI on the gender wage differentials: on one hand, the gap may widen due to weakened bargaining power of women crowded in the MNCs, while on the other hand, the MNCs may reward the higher education levels of female workers, lowering the gender wage gap. While it is widely argued that foreign capital propels an economy towards the trajectory of growth, the objectives of an egalitarian welfare-maximizing state are fulfilled only if economic growth and welfare are accompanied by reduction in gender wage inequality. The analysis of this chapter shows that although FDI in countries with female labour-intensive export-oriented sectors may accentuate gender wage inequality, it may also raise the welfare of the economy. These results point towards a trade-off between gender wage inequality and welfare of the economy.


Female Labour Foreign Capital Female Worker Wage Inequality Efficiency Unit 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


  1. Altonji J, Hayashi F, Kotlikoff LJ (1992) Is the extended family altruistically linked? Direct tests using micro data. Am Econ Rev 82(5):1177–1198Google Scholar
  2. Anderson S, Baland JM (2002) The economics of roscas and intra-household resource allocation. Q J Econ 117(3):963–995CrossRefGoogle Scholar
  3. Balakrishnan R (2002) The hidden assembly line: gender dynamics of subcontracted work in a global economy. Kumarian Press, BloomfieldGoogle Scholar
  4. Berik G, Rodgers Y, Zveglich J (2004) International trade and gender wage discrimination: evidence from East Asia. Rev Dev Econ 8(2):237–254CrossRefGoogle Scholar
  5. Bisgrove EZ, Popkin BM (1996) Does women’s work improve their nutrition: evidence from the urban Philippines. Soc Sci Med 43(10):1475–1488CrossRefGoogle Scholar
  6. Bliss CJ, Stern NH (1978) Productivity, wages, and nutrition, Parts I and II. J Dev Econ 5(4):331–362CrossRefGoogle Scholar
  7. Braunstein E, Brenner M (2007) Foreign direct investment and gendered wages in urban China. Fem Econ 31(3–4):213–237CrossRefGoogle Scholar
  8. Brecher RA, Diaz Alejandro CF (1977) Tariffs, foreign capital and immiserizing growth. J Int Econ 7:317–322CrossRefGoogle Scholar
  9. Carr M, Chen M, Tate J (2000) Globalization and home-based workers. Fem Econ 6(3):123–142CrossRefGoogle Scholar
  10. Caves RE, Frankel JA, Jones RW (1990) World trade and payments, 5th edn. Scott/Foresman/Little/Brown Higher Education, LondonGoogle Scholar
  11. Chaudhuri S (2005) Labour market distortion, technology transfer and gainful effects of foreign capital. Manch Sch 73(2):214–227CrossRefGoogle Scholar
  12. Chaudhuri S (2007) Foreign capital, welfare and unemployment in the presence of agricultural dualism. Jpn World Econ 19(2):149–165CrossRefGoogle Scholar
  13. Chaudhuri S, Mukhopadhyay U (2009) Revisiting the informal sector: a general equilibrium approach. Springer, New YorkGoogle Scholar
  14. Chaudhuri S, Yabuuchi S, Mukhopadhyay U (2006) Inflow of foreign capital and trade liberalization in a model with an informal sector and urban unemployment. Pac Econ Rev 11:87–103CrossRefGoogle Scholar
  15. Corley M, Perardel Y, Popova K (2005) Wage inequality by gender and occupation: a cross-country analysis, Employment strategy papers no. 20. International Labour Office, GenevaGoogle Scholar
  16. Duncan T (1997) Incomes, expenditures and health outcomes: evidence on intrahousehold resource allocation. In: Haddad L, Hoddinott J, Alderman H (eds) Intrahousehold resource allocation in developing countries: models, methods and policy. The Johns Hopkins University Press, Baltimore/LondonGoogle Scholar
  17. Fiske ST (1998) Stereotyping, prejudice, and discrimination. In: Fiske ST, Gilbert DT, Lindsay G (eds) The handbook of social psychology, vol 2. McGraw Hill, New York, pp 357–414Google Scholar
  18. Goldin C (2002) A pollution theory of discrimination: male and female differentials in occupations and earnings. NBER working paper No. 8985, Cambridge, MAGoogle Scholar
  19. Guyer J (1988) Dynamic approaches to domestic budgeting: cases and methods from Africa. In: Dwyer D, Bruce J (eds) A home divided: women and income in the third world. Stanford University Press, StanfordGoogle Scholar
  20. Herz B, Sperling GB (2004) What works in girls’ education, Evidence and policies from the developing world. Council on Foreign Relations, New YorkGoogle Scholar
  21. Hoddinott J, Haddad L (1995) Does female income share influence household expenditure? Evidence from Cote d’Ivoire’. Oxf Bull Econ Stat LVII:77–97CrossRefGoogle Scholar
  22. Jones RW (1971) A three-factor model in theory, trade and history. In: Bhagwati J et al (eds) Trade, balance of payments and growth. North-Holland, AmsterdamGoogle Scholar
  23. Kabeer N (2000) The power to choose: Bangladeshi women and labour market decisions in London and Dhaka. Verso, LondonGoogle Scholar
  24. Kao C, Polachek S, Wunnava P (1994) Male–female wage differentials in Taiwan: a human capital approach. Econ Dev Cult Change 42(2):351–374CrossRefGoogle Scholar
  25. Kurz KM, Welch CJ (2000) Enhancing nutrition results: the case for a women’s resources approach. International Center for Research on Women, Washington, DCGoogle Scholar
  26. Kusago T, Barham B (2001) Preference heterogeneity, power, and intrahousehold decision-making in rural Malaysia. World Dev 29(7):1237–1256CrossRefGoogle Scholar
  27. Leibenstein H (1957) Economic backwardness and economic growth. Wiley, New YorkGoogle Scholar
  28. Marjit S, Beladi H (1996) Protection and gainful effects of foreign capital. Econ Lett 53:311–326CrossRefGoogle Scholar
  29. Marjit S, Broll U, Mitra S (1997) Targeting sectors for foreign capital inflow in a small developing economy. Rev Int Econ 5:101–106CrossRefGoogle Scholar
  30. Mukhopadhyay, Chaudhuri (2013) Economic liberalization, gender wage inequality and welfare. J Int Trade Econ Dev 22(8):1214–1239CrossRefGoogle Scholar
  31. Oostendorp R (2004) Globalization and the gender wage gap, World Bank policy research working paper 3256. World Bank, Washington, DCCrossRefGoogle Scholar
  32. Park C (2001) Is extended family in low-income countries altruistically linked? Evidences from Bangladesh. Working paper no. 0107. SCAPE, National University of Singapore, SingaporeGoogle Scholar
  33. Polachek SW (2004) How the human capital model explains why the gender wage gap narrowed. Discussion paper No. 1102, The Institute for the Study of Labor (IZA), BonnGoogle Scholar
  34. Quisumbing AR, Haddad L, Meinzen-Dick R, Brown LR (1998) Gender issues for food security in developing countries: implications for project design and implementation. Can J Dev Stud XIX(Special Issue):185–208CrossRefGoogle Scholar
  35. Ramachandran N (2006) Women and food security in South Asia: current issues and emerging concerns. UNU – WIDER research paper no. 131, HelsinkiGoogle Scholar
  36. Seguino S (2000) The effects of structural change and economic liberalization on gender wage differentials in South Korea and Taiwan. Camb J Econ 24(4):437–459CrossRefGoogle Scholar
  37. Seguino S (2002) Promoting gender equality through labor standards and living wages: an exploration of the issues. Paper prepared for presentation at global labor standards and living wages conference, PERI, Amherst, MA, 19–20 April 2002Google Scholar
  38. Sen G, Östlin P (2007) Unequal, unfair, ineffective and inefficient gender inequity in health: why it exists and how we can change it, Final report to the WHO commission on social determinants of health. National Collaborating Centre for Determinants of Health, AntigonishGoogle Scholar
  39. Sharma N (2007) Gender inequality and women’s health: an empirical study of the factors affecting their health. Paper presented at the annual meeting of the Southern Political Science Association, New Orleans, LA, 03 Jan 2007.
  40. Siegmann KA (2006) Globalisation, gender and equity – effects of foreign direct investment on labour markets in rural Indonesia. J Econ 3(1):113–130Google Scholar
  41. UNCTAD (1999) World investment report. United Nations, New YorkGoogle Scholar
  42. UNICEF (2007) Women and children: The Double Dividend of Gender Equality, New YorkGoogle Scholar
  43. Vijaya RM, Kaltani L (2007) Foreign direct investment and wages: a bargaining power approach. J World-Syst Res 13(1):83–95Google Scholar
  44. Von Braun J, Kennedy E (1994) Agricultural commercialisation, economic development and nutrition. The Johns Hopkins University Press for IFPRI, BaltimoreGoogle Scholar

Copyright information

© Springer India 2014

Authors and Affiliations

  • Sarbajit Chaudhuri
    • 1
  • Ujjaini Mukhopadhyay
    • 2
  1. 1.Department of EconomicsUniversity of CalcuttaKolkataIndia
  2. 2.Department of EconomicsBehala CollegeKolkataIndia

Personalised recommendations