This paper reviews the existing empirical literature on the effects of offshoring and foreign activities of Multinational Enterprises (MNEs) on the labor markets of developed countries. Avail-able results provide robust evidence in support of the fear that material offshoring worsens wage inequality between skilled and unskilled workers; on the contrary, results are still too ambiguous to support concerns that material offshoring raises the elasticity of unskilled labor demand and produces adverse short-run employment dynamics. Service offshoring does not reduce total labor demand significantly and does not pose serious threats to human capital accumulation. Finally, MNEs tend to substitute domestic labor with foreign labor, but the relationship is weak; moreover, substitutability is mainly driven by horizontal, market-seeking, Foreign Direct Investments.
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Paper provided by CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy in its series CESPRI Working Papers with number
196.
Length: pages 62 Date of creation: Jan 2007 Date of revision:
Jan 2007 Handle: RePEc:cri:cespri:wp196
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Find related papers by JEL classification: F16 - International Economics - - Trade - - - Trade and Labor Market Interactions F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
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