Do multinational enterprises push up wages of domestic firms in the Italian manufacturing sector?

This paper analyzes the effects of foreign direct investment (FDI) on wages paid by domestic firms in the Italian manufacturing sector over the period 2002-2007. In particular, we investigate the impact of Multinational Enterprises (MNEs) on wages paid by local firms which operate in the same industry (horizontal wage spillovers) or have linkages with MNEs in both downstream and upstream industries (vertical wage spillovers). By using a large panel dataset, we find evidence that wage spillovers at both intra- and inter-industry level are affected by the technological gap between local and foreign firms. In particular, in case of medium gap, workers employed in domestic firms in upstream and downstream sectors seem to benefit from the presence of MNEs in terms of higher wages. This happens also in case of high gap but only for workers employed in domestic firms at intra-industry level: local workers in upstream and downstream sectors seem to suffer from the presence of MNEs in terms of lower wages.