With respect to human capital, FDI could have ambiguous
effects. If skilled labor is scarce, and since MNEs
typically hire relatively skilled workers, FDI could reduce
the stock of human capital for domestic firms. More
positively, though, FDI could improve the national welfare
if the wages paid by MNEs were higher than those
paid by domestic firms. In instances where the earliermentioned
robust finding that productivity tends to be
higher for MNEs than for domestic firms in the same sector
prevails, FDI might be expected to contribute to
higher GDP. Were MNEs to pay market wages, they
would entirely capture any increase in GDP and the national
welfare would, hence, not be improved. But there
is ample evidence that MNEs pay above-market wages
(Aitken et al., 1996; Haddad and Harrison, 1993;
Lipsey, 2002), and it is thus likely that higher productivity
is to some degree shared between the firms and their
workers.