Paper long abstract:

Despite massive foreign direct investment (FDI) around the world, there is much we do not know about the consequences of such investment on the political economy of the host country and consequences for domestic politics. Previous research suggests that FDI improves local development by promoting economic growth. However, it has been argued that these investments also have a positive effect on workers' welfare and ultimately domestic politics. This paper explores this issue, by analyzing Chinese FDI in Kyrgyzstan, which constitutes a significant part of this small country's economy. Investment in Kyrgyzstan is concentrated in mining and infrastructure construction. Using geolocated data from household panel surveys and listed firms in Kyrgyzstan, I investigate the impact of foreign infrastructure and natural resource investment on (1) worker well-being and (2) ultimately domestic politics. By comparing state-owned and foreign firms, Chinese and Western foreign firms, this paper demonstrates that FDI provides higher wages and better insurance coverage but does not necessarily benefit local workers because of in-immigrant competition, health issues, labor strikes, and inequality. Investment from Chinese firms face more strikes, environmental, and foreign labor issues.