Foreign Direct Investment, development and gender equity: a review of research and policy

Assessing the gender impacts of FDI

By: Braunstein E
Published by: United Nations (UN) Research Institute for Social Development (UNRISD) , 2006
Via: Eldis

This paper provides a summary of the empirical and policy-related literature on the multifaceted relationships between gender inequalities and foreign direct investment (FDI). It reviews the research on the impact of FDI on investment, productivity, trade, employment, wages and working conditions, finding that: very little is understood about the dynamic impact of FDI; even where positive correlations between FDI and investment, employment or wages appear, there is little analysis of whether and how the impact is sustained, and to what extent (and how) FDI impacts the process and trajectory of development; the research in which there does seem to be an emerging consensus is on the importance of the economic and policy context for FDI in determining its eventual impact.

The paper focuses specifically on identifying impacts of FDI on women, and finds that: foreign investment in labour-intensive, largely export-oriented industries has had a significant impact on women’s work and development; while there has been a positive relationship between women’s employment and FDI in semi-industrialised countries, there is mounting evidence that women either lose jobs to more highly qualified men as industries upgrade, or get pushed down the production chain into subcontracted work as competition forces firms to continually lower costs; there is likely to be some short-term improvement in women’s incomes as FDI expands, but the longer-term trajectory of women’s wages is less promising; the nature of gender segmentation and industrial distribution – where women are concentrated in highly competitive traded sectors – and the high mobility of transnational capital are instrumental in determining the gender wage gap; while women’s wages may undergo an absolute boost from foreign investment, it seems less likely that this will result in a closing of the gender wage gap.

The paper calls for more research on understanding the relationship between FDI and gender equity, and both the impact of FDI on gender and of gender on FDI. It also urges for work that identifyies where and why foreign investment has worked well for women and development, with particular emphasis on the role of public policy. The last section of the paper will review policies for managing labour-intensive, export-oriented FDI. It introduces a framework for evaluating FDI policies, categorising them according to their various targets: attracting FDI, contributing to economic growth or promoting gender equity. Three key policy targets are evaluated: those that link FDI with growth, with growth and equity, and with equity. It argues that, to achieve equity, the most important intervention open to governments is to enhance the productive capacities of women and girls, as well as to expand the social supports available to them and their families as they enter the labour market.