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The Effect of FDI on Job Separation

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  • Muendler, Marc A
  • Becker, Sascha O.

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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Bibliographic 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 qt28h3p82z.

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Date of creation: 01 Nov 2006
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Handle: RePEc:cdl:ucsdec:qt28h3p82z

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

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References

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  1. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1992. "Earnings losses of displaced workers," Working Paper Series, Macroeconomic Issues 92-28, Federal Reserve Bank of Chicago.
  2. Hashem Pesaran & Davide Pettenuzzo & Allan Timmermann, 2006. "Learning, Structural Instability and Present Value Calculations," IEPR Working Papers 06.42, Institute of Economic Policy Research (IEPR).
  3. Muendler, Marc-Andreas & Becker, Sascha O., 2006. "Margins of Multinational Labor Substitution," IZA Discussion Papers 2131, Institute for the Study of Labor (IZA).
  4. Heckman, James & Navarro-Lozano, Salvador, 2003. "Using matching, instrumental variables and control functions to estimate economic choice models," Working Paper Series 2003:4, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  5. Barba Navaretti, Giorgio & Castellani, Davide, 2004. "Investments Abroad and Performance at Home: Evidence from Italian Multinationals," CEPR Discussion Papers 4284, C.E.P.R. Discussion Papers.
  6. Antras, Pol, 2003. "Firms, Contracts, and Trade Structure," Scholarly Articles 3196328, Harvard University Department of Economics.
  7. 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.
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  10. 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.
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  13. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  14. Robert Jäckle & Georg Wamser, 2010. "Going Multinational: What are the Effects on Home-Market Performance?," German Economic Review, Verein für Socialpolitik, vol. 11, pages 188-207, 05.
  15. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1993. "Long-term earnings losses of high-seniority displaced workers," Economic Perspectives, Federal Reserve Bank of Chicago, issue Nov, pages 2-20.
  16. Slaughter, Matthew J., 2000. "Production transfer within multinational enterprises and American wages," Journal of International Economics, Elsevier, vol. 50(2), pages 449-472, April.
  17. 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.
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  19. repec:rus:hseeco:121607 is not listed on IDEAS
  20. Michael P. Keane & Susan E. Feinberg, 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.
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Citations

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Cited by:
  1. Marc-Andreas Muendler & Sascha O. Becker, 2006. "Margins of Multinational Labor Substitution," CESifo Working Paper Series 1713, CESifo Group Munich.
  2. 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.
  3. Ronald Bachmann & Daniel Baumgarten & Joel Stiebale, 2011. "Cross-border Investment, Heterogeneous Workers, and Employment Security – Evidence from Germany," Ruhr Economic Papers 0268, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  4. Vivien Procher & Dirk Engel, 2009. "Export, FDI and Productivity – Evidence for French Firms," Ruhr Economic Papers 0111, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  5. Robert Jäckle & Georg Wamser, 2010. "Going Multinational: What are the Effects on Home-Market Performance?," German Economic Review, Verein für Socialpolitik, vol. 11, pages 188-207, 05.
  6. Buch, Claudia M. & Lipponer, Alexander, 2010. "Volatile multinationals? Evidence from the labor demand of German firms," Labour Economics, Elsevier, vol. 17(2), pages 345-353, April.
  7. Christian Arndt & Anselm Mattes, 2008. "Mikroökonomische Determinanten und Effekte von FDI am Beispiel Baden-Württemberg," IAW Discussion Papers 43, Institut für Angewandte Wirtschaftsforschung (IAW).
  8. Stiebale, Joel, 2012. "Cross-Border M&A and Innovative Activity: Firm-Level Evidence," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62027, Verein für Socialpolitik / German Economic Association.
  9. Sebastian Hügelschäffer & Daniel Kromer & Alexander Lipponer, 2009. "Die deutsche Statistik über Direktinvestitionen: Neuerungen und wissenschaftliche Nutzung," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer, vol. 3(3), pages 157-167, November.
  10. Olga Bohachova & Bernhard Boockmann & Claudia M. Buch, 2011. "Labor Demand During the Crisis: What Happened in Germany?," CESifo Working Paper Series 3625, CESifo Group Munich.
  11. Timo Mitze & Björn Alecke & Gerhard Untiedt, 2009. "Trade-FDI Linkages in a System of Gravity Equations for German Regional Data," Ruhr Economic Papers 0084, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  12. Wilhelm Kohler & Christian Arndt & Anselm Mattes & Michael Knogler & Fidelis Lankes & Jarko Fidmuc, 2007. "Die neuen Mitglieder: Motor oder Bremse der europäischen Integration?," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 60(14), pages 03-20, 07.

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