The effects of foreign direct investment inflows to wages in Turkey

From the historical point of view, Foreign Direct Investments (FDI`s)were initially attracted by natural resources. From the second half of the 20th century,the main reason which oriented FDI`s to developing counties has been cheap labor.Recently, multinational companies, leading world trade and production, operate incountries, which have cheap labor force to protect and/or expand their market shares.FDI`s accelerate technology transfers which in turn cause productivityspillovers. Therefore, it becomes compulsory to pay higher wages to workers. Animportant set of papers has sought to test whether FDI`s affect wages. Most of theempirical work indicated that FDI`s affect wages.In this study, we investigate the effects of the FDI`s on reel wages inTurkey for the period from 1980 to 2002.The first chapter provides a definition of the FDI`s and compares FDI`swith the other types of investments. Afterwards, foreign investment theories arereviewed.The second chapter reviews the theoretical and empirical literatureconcerned with the potential determinants of FDI`s. The related literature indicatesthat labor costs and wages are among the potential determinants of the FDI`s.In the third chapter, we evaluate the performance of FDI`s in Turkey.Some international data is also presented to compare Turkey`s performance of FDI`swith other countries` performances.In the last chapter, we use an Ordinary Least Squares to determine theeffect of FDI`s on real wages in Turkey from 1980 to 2002. The regression resultsindicates that there is a positive relationship between FDI`s and real wages in Turkey.