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Investment abroad and labour adjustment at home: evidence from UK multinational firms

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  • Helen Simpson

Abstract

. This paper provides new evidence on the effects of overseas FDI on the skill‐mix of multinational firms’ home‐country operations. The analysis exploits China's WTO accession to identify the impact of outward investment into a low‐wage economy and uses plant‐level data to investigate changes in industrial structure within firms driven by plant closures. As predicted by models of vertical FDI, the paper demonstrates that overseas investment in low‐wage economies is associated with asymmetric effects on workers in low‐ and high‐skill industries in the home economy and, in particular, with firms closing down plants in low‐skill industries. JEL classification: F2 Investissement à l’étranger et ajustement du travail dans le marché domestique: résultats pour des entreprises plurinationales au Royaume‐Uni. Ce texte fournit de nouveaux résultats sur les effets des investissements directs vers l’étranger sur le mélange de qualifications dans les opérations domestiques des entreprises plurinationales. L’analyse bâtit sur l’accession récente de la Chine à l’OMC pour identifier l’impact d’investissements dans une économie étrangère à bas salaires, et utilise des données au niveau des établissements pour enquêter sur les changements dans la structure industrielle intra‐firme déclenchés par les fermetures d’établissements. Comme suggéré par les modèles d’investissements directs verticaux à l’étranger, le texte montre que l’investissement dans des économies étrangères à bas salaires est associé avec des effets asymétriques sur les travailleurs dans les industries peu et hautement qualifiées de l’économie domestique, et en particulier avec la fermeture d’établissements dans les industries construites sur des faibles qualifications.

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  • Helen Simpson, 2012. "Investment abroad and labour adjustment at home: evidence from UK multinational firms," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(2), pages 698-731, May.
    • Handle: RePEc:wly:canjec:v:45:y:2012:i:2:p:698-731
    DOI: 10.1111/j.1540-5982.2012.01712.x
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    2. Manderson, Edward J. & Kneller, Richard, 2020. "Energy endowments and the location of manufacturing firms," Journal of Environmental Economics and Management, Elsevier, vol. 101(C).
    3. Boehm, Christoph E. & Flaaen, Aaron & Pandalai-Nayar, Nitya, 2020. "Multinationals, Offshoring, and the Decline of U.S. Manufacturing," Journal of International Economics, Elsevier, vol. 127(C).
    4. Keiko Ito & Kenta Ikeuchi, 2017. "Overseas Expansion and Domestic Business Restructuring in Japanese Firms," The Developing Economies, Institute of Developing Economies, vol. 55(2), pages 75-104, June.
    5. 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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    • F2 - International Economics - - International Factor Movements and International Business

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