Foreign direct investment
AbstractThis paper argues that the liberalisation of foregin direct investment (FDI) has made labour costs more important to domestic investment and long-run labour demand. It provides evidence from British and German data that is consistent with this view. First, high unit labour costs increase FDI outflows and lower FDI inflows. Second, the effect of unit labour costs on domestic manufacturing investment was more negative in the high-FDI 1980s than in the low-FDI 1970s, and this change was concentrated in high-FDI industries. The implied effect on long-run labour demand is substantial.
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Bibliographic InfoPaper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 20351.
Length: 58 pages
Date of creation: Mar 1997
Date of revision:
Find related papers by JEL classification:
- F3 - International Economics - - International Finance
- G3 - Financial Economics - - Corporate Finance and Governance
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