How Do Trade and Foreign Investment Affect Wage Patterns: An Empirical Analysis of Indian Organised Manufacturing

This article empirically verifies the impact of trade liberalisation on wage rates in Indian manufacturing industries while controlling for the effects of several industry-specific factors, such as net value added, capital intensity, R&D intensity and foreign direct investment (FDI). This impact is seen in three different employment patterns in India’s organised manufacturing industry—contract vs. regular workers, women vs. men and unskilled vs. skilled workers. The result of a panel analysis using a fixed effect model shows that an industry’s export and import have a positive impact on wage rates. Even, FDI has a considerable favourable impact on the level of wages and wage rates in Indian manufacturing. While technology-related activities such as R&D tend to provide no wage increases or job opportunities for both regular and contract workers.