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Outward foreign direct investment and inward international labor migration: substitutes or complements?

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  • Pan-Long Tsai
  • Ching-Lung Tsay

Abstract

Motivated by the positive relationship between outward FDI and inward ILM observed in Taiwan in the 1990s, this study proposed a formal model to explain the phenomenon. With deterioration in international competitiveness owing to a continuing rise in the domestic wage rate and/or appreciation of the domestic currency, it was shown that relocating production abroad is a natural reaction by manufacturing firms unless a sufficient number of guest workers can be imported. As the importation of labor was restricted to a level lower than that required for maintaining international competitiveness, a simultaneous increase in outward FDI and inward ILM would appear. When labor inflows are limited, importing guest workers can lead to more employment of the domestic labor if the demand for labor is sufficiently elastic.

Suggested Citation

  • Pan-Long Tsai & Ching-Lung Tsay, 2008. "Outward foreign direct investment and inward international labor migration: substitutes or complements?," International Economic Journal, Taylor & Francis Journals, vol. 22(1), pages 127-139.
    • Handle: RePEc:taf:intecj:v:22:y:2008:i:1:p:127-139
    DOI: 10.1080/10168730801887125
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    References listed on IDEAS

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    1. Bhagwati, Jagdish N. & Schatz, Klaus-Werner & Wong, Kar-yiu, 1984. "The West German gastarbeiter system of immigration," European Economic Review, Elsevier, vol. 26(3), pages 277-294, December.
    2. Solimano, Andrés & Watts, Nathalie, 2005. "International migration, capital flows and the global economy: a long run view," Macroeconomía del Desarrollo 5400, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
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    Cited by:

    1. Hatzigeorgiou, Andreas & Lodefalk, Magnus, 2018. "Anti-Migration as a Threat to Internationalization? A Review of the Migration-Internationalization Literature," GLO Discussion Paper Series 287, Global Labor Organization (GLO).
    2. Cristina Procházková Ilinitchi, 2010. "Selected Migration Theories and their Importance on Drawing Migration Policies [Vybrané teorie migrace a jejich význam při vytváření migračních politik]," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2010(6), pages 3-26.
    3. Hatzigeorgiou, Andreas & Lodefalk, Magnus, 2017. "Anti-Migration as a Threat to Internationalization?," Ratio Working Papers 302, The Ratio Institute.
    4. Hatzigeorgiou, Andreas & Lodefalk, Magnus, 2018. "Do Migrants Facilitate Internationalization? A Review of the Literature," Working Papers 2018:11, Örebro University, School of Business, revised 19 Dec 2019.

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