Foreign Ownership And Local Firms Capital Labor Ratio: Case Of Abu Dhabi

Abstract

This paper examines the impact of foreign ownership on local firms capital deepness in the resource-rich economy of Abu Dhabi. The authors use a novel dataset of more than 15,000 local firms registered in the Emirate of Abu Dhabi.

Empirical evidence shows a positive effect of foreign ownership on the capital labor ratio for the local firms, which is typically channeled through technology and knowledge transfer to the local firms. The results also show that the capital labor ratio of a firm is positively associated to the firm involvement in international trade. Overall, the evidence supports the fact that the economy of Abu Dhabi may benefit from foreign ownership and the openness to trade.