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It matters where you go: Outward foreign direct investment and multinational employment growth at home

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  • Debaere, Peter
  • Lee, Hongshik
  • Lee, Joonhyung

Abstract

How does outward foreign direct investment (FDI) affect employment growth of the multinational corporations (MNCs) in the home country? Does the impact of outward investment differ by the level of development of the destination country of the FDI? Using a difference-in-difference approach, we assess the impact of starting to invest in less-advanced countries compared with investing in more-advanced countries. To obtain suitable control groups in each case, we use the propensity score method to select national firms that ex post did not take the investment decisions that we study even though ex ante they would have been equally likely to. We find that moving to less-advanced countries decreases a company's employment growth rate especially in the short run. On the other hand, moving to more-advanced countries does not consistently affect employment growth in any significant way. Including investment decisions of established multinationals in the estimation somewhat weakens but does not overturn this conclusion.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 91 (2010)
Issue (Month): 2 (March)
Pages: 301-309

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Handle: RePEc:eee:deveco:v:91:y:2010:i:2:p:301-309

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Web page: http://www.elsevier.com/locate/devec

Related research

Keywords: Multinationals Foreign direct investment Location choice Labor demand;

References

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  1. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Scholarly Articles 3445092, Harvard University Department of Economics.
  2. Andrew B. Bernard & J. Bradford Jensen, 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," NBER Working Papers 6272, National Bureau of Economic Research, Inc.
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  5. Karolina Ekholm & Rikard Forslid & James Markusen, 2003. "Export-Platform Foreign Direct Investment," NBER Working Papers 9517, National Bureau of Economic Research, Inc.
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  8. Mihir A. Desai & C. Fritz Foley & James R. Hines, 2009. "Domestic Effects of the Foreign Activities of US Multinationals," American Economic Journal: Economic Policy, American Economic Association, vol. 1(1), pages 181-203, February.
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  11. Stephen Ross Yeaple, 2003. "The Role of Skill Endowments in the Structure of U.S. Outward Foreign Direct Investment," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 726-734, August.
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Citations

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Cited by:
  1. Muhammad, Shahbaz & Samia, Nasreen & Talat, Afza, 2011. "Environmental consequences of economic growth and foreign direct investment: evidence from panel data analysis," MPRA Paper 32547, University Library of Munich, Germany, revised 03 Aug 2011.
  2. Ayako Obashi & Kazunobu Hayakawa & Toshiyuki Matsuura & Kazuyuki Motohashi, 2010. "A Two-dimensional Analysis of the Impact of Outward FDI on Performance at Home: Evidence from Japanese Manufacturing Firms," Keio/Kyoto Joint Global COE Discussion Paper Series 2010-005, Keio/Kyoto Joint Global COE Program.
  3. Castellani, Davide & Pieri, Fabio, 2013. "R&D offshoring and the productivity growth of European regions," CIRCLE Electronic Working Papers 2013/20, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
  4. Nihal Bayraktar, 2013. "Foreign Direct investment and Investment Climate," EcoMod2013 5294, EcoMod.
  5. Jung Hur & Hea-Jung Hyun, 2011. "Who Goes Where and How? Firm Heterogeneity in the Choice of FDI Type and Location," Working Papers 1105, Research Institute for Market Economy, Sogang University.
  6. Alexander Hijzen & Sébastien Jean & Thierry Mayer, . "The Effects at Home of Initiating Production Abroad: Evidence from Matched French Firms," Discussion Papers 09/24, University of Nottingham, GEP.
  7. Tsou, Meng-Wen & Liu, Jin-Tan & Hammitt, James K. & Chang, Ching-Fu, 2013. "The impact of foreign direct investment in China on employment adjustments in Taiwan: Evidence from matched employer–employee data," Japan and the World Economy, Elsevier, vol. 25, pages 68-79.

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