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The Effect of FDI on Job Separation

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Author Info
Marc Muendler (University of California, San Diego)
Sascha Becker (University of Munich)

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Abstract

A novel linked employer-employee data set documents that expanding multinational enterprises retain more domestic jobs than competitors without foreign expansion. In contrast to prior research, a propensity score estimator allows enterprise performance to vary with foreign direct investment (FDI) and shows that the foreign expansion itself is the dominant explanatory factor for reduced worker separation rates. Bounding, concomitant variable tests, and robustness checks rule out competing hypotheses. The finding is consistent with the idea that, given global factor price differences, a prevention of enterprises from outward FDI would lead to more domestic worker separations. FDI raises domestic-worker retention more pronouncedly among highly educated workers and for expansions to distant locations.

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File URL: http://repositories.cdlib.org/cgi/viewcontent.cgi?article=1072&context=ucsdecon
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Publisher Info
Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number 2006-11.

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Date of creation: 01 Nov 2006
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Handle: RePEc:cdl:ucsdec:2006-11

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Related research
Keywords: Multinational enterprises; international investment; demand for labor; worker layoffs; linked employer-employee data;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Marc-Andreas Muendler, 2006. "Margins of Multinational Labor Substitution," University of California at San Diego, Economics Working Paper Series 2006-04, Department of Economics, UC San Diego. [Downloadable!]
    Other versions:
  2. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September. [Downloadable!] (restricted)
    Other versions:
  3. Jäckle, Robert, 2006. "Going multinational: What are the effects on home market performance?," Discussion Paper Series 1: Economic Studies 2006,03, Deutsche Bundesbank, Research Centre. [Downloadable!]
  4. Slaughter, Matthew J., 2000. "Production transfer within multinational enterprises and American wages," Journal of International Economics, Elsevier, vol. 50(2), pages 449-472, April. [Downloadable!] (restricted)
  5. Susan E. Feinberg & Michael P. Keane, 2006. "Accounting for the Growth of MNC-Based Trade Using a Structural Model of U.S. MNCs," American Economic Review, American Economic Association, vol. 96(5), pages 1515-1558, December. [Downloadable!]
  6. James Heckman & Salvador Navarro-Lozano, 2004. "Using Matching, Instrumental Variables, and Control Functions to Estimate Economic Choice Models," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 30-57, 08. [Downloadable!] (restricted)
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  7. Geishecker, Ingo, 2006. "The impact of international outsourcing on individual employment security: a micro level analysis," Discussion Papers 2006/17, Free University Berlin, School of Business & Economics. [Downloadable!]
  8. repec:rus:hseeco:121607 is not listed on IDEAS
  9. Michael Lechner, 2002. "Program Heterogeneity And Propensity Score Matching: An Application To The Evaluation Of Active Labor Market Policies," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 205-220, May. [Downloadable!] (restricted)
  10. Jozef Konings & Alan Patrick Murphy, 2003. "Do Multinational Enterprises Relocate Employment to Low Wage Regions? Evidence from European Multinationals," LICOS Discussion Papers 13103, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
  11. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March. [Downloadable!] (restricted)
  12. Kletzer, Lori G, 1998. "Job Displacement," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 115-36, Winter. [Downloadable!] (restricted)
  13. Pol Antrà s, 2003. "Firms, Contracts, and Trade Structure," NBER Working Papers 9740, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Ann E. Harrison & Margaret S. McMillan, 2006. "Outsourcing Jobs? Multinationals and US Employment," NBER Working Papers 12372, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  15. Jozef Konings & Alan Patrick Murphy, 2006. "Do Multinational Enterprises Relocate Employment to Low-Wage Regions? Evidence from European Multinationals," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(2), pages 267-286, July. [Downloadable!] (restricted)
  16. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March. [Downloadable!]
  17. Karolina Ekholm & Rikard Forslid & James Markusen, 2003. "Export-Platform Foreign Direct Investment," NBER Working Papers 9517, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mitze, Timo & Alecke, Björn & Untiedt, Gerhard, 2008. "Trade, FDI and Cross-Variable Linkages: A German (Macro-)Regional Perspective," MPRA Paper 12245, University Library of Munich, Germany. [Downloadable!]
  2. Buch, Claudia M. & Lipponer, Alexander, 2007. "Volatile multinationals? Evidence from the labor demand of German firms," Discussion Paper Series 1: Economic Studies 2007,22, Deutsche Bundesbank, Research Centre. [Downloadable!]
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