FDI Liberalization, Migration, and Skill Structure of Labor Market in China

Throughout the era of China’s WTO accession, the labor market and education dynamics have been significantly impacted by the surge in FDI. This study systematically scrutinizes how these factors interplay, with emphasis on migrants’ educational attainment, skill premium, and employment status. Our empirical evidence suggests that while FDI enhances education premiums and the educational attainment in general. Nevertheless, an intriguing anomaly emerges with the downward trajectory of migrants' educational levels. This counterintuitive phenomenon is primarily driven by the double-edged predicament of employment discrimination against high-skill migrants and the disproportional growth of low-ability migrants. Our quantitative simulation shows that migration workers will improve their educational levels by 16% by migrating to the higher FDI-exposed region, and improve 4% by removal of the employment discrimination toward the migrants. Our study contributes to the understanding labor market structural shifts and migrant employment conditions in China during its WTO accession period