Do High FDI Indian Firms Pay Low Wages & Have Higher Output?

Since trade liberalization in 1991, foreign firms in large numbers came to invest in India. It may cause wage increases in foreign owned firms leading to wage spillover effects within the industry. This paper investigates the relationship between wage dispersion and output of firms belonging to industry sectors with high foreign investment in India. It was found that the current wage dispersion may have a stronger significant effect on the decreasing current output. The low paying firms in industry sector with high foreign investment however will generate more output in the next year compared to those in other industry sectors.