How does foreign direct investment (FDI) affect the wage levels of cities in a host country? This paper uses a panel dataset of Chinese cities to examine the impact of inward FDI on the urban real wage. The results suggest that the existence of FDI has a significant and positive effect on urban real wages and that this impact remains significant after controlling for other city characteristics. Cross-city variation of FDI intensity is one important factor contributing to intercity wage inequality.
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