MNEs and wages: The role of productivity spillovers and imperfect labor markets

► Wage spillovers from FDI with productivity spillovers, labor market imperfections. ► Increased FDI increases wages paid by both foreign and local firms. ► The dispersion in wages between these two wages change with FDI. ► More the productivity spillovers less the change in wage dispersion. ► Labor market imperfections should be controlled for in econometric exercises.