Advanced Search
MyIDEAS: Login

The Impact Of Outward Fdi On Home-Country Employment In A Low-Cost Transition Economy

Contents:

Author Info

  • Jaan Masso
  • Urmas Varblane
  • Priit Vahter

Abstract

The current extensive literature on the home-country employment effect of FDI focuses almost exclusively on the case of investments from high-income and high labour cost home countries. In our paper we analyse the home-country employment effect in Estonia as a low- cost medium-income transition economy. The data from the population of Estonian firms between 1995 and 2002 was studied with regression analysis and propensity score matching in order to construct an appropriate counterfactual for the firms that have invested abroad. The results indicate that in general, outward FDI had a positive impact on the home-country employment growth. Concerning direct investors (domestic firms investing abroad) and indirect investors (foreign-owned firms investing abroad), the former group had a stronger home- country employment effect due to their smaller pre-investment size and because the subsidiaries of indirect investors are served from other locations rather than from Estonia. The positive employment effect was much stronger in the case of investments made after 1999 due to the better macro-economic performance of Estonia from the year 2000 onwards. Services firms demonstrated a stronger home-country employment effect than manufacturing firms. Our results imply that the logic of the outward investments from low-cost transition and developing economies differs from that of high-income countries.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://infutik.mtk.ut.ee/www/kodu/RePEc/mtk/febpdf/febawb52.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Faculty of Economics and Business Administration, University of Tartu (Estonia) in its series University of Tartu - Faculty of Economics and Business Administration Working Paper Series with number 52.

as in new window
Length: 67 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:mtk:febawb:52

Contact details of provider:
Postal: Narva mnt 4, 51009 Tartu
Phone: (+372 7) 376 310
Fax: (+372 7) 376 312
Email:
Web page: http://www.mtk.ut.ee
More information through EDIRC

Related research

Keywords: outward foreign direct investments; employment effects of FDI; Central- and Eastern Europe; transition;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Smarzynska, Beata K., 2002. "Does foreign direct investment increase the productivity of domestic firms : in search of spillovers through backward linkages," Policy Research Working Paper Series 2923, The World Bank.
  2. Irving B. Kravis & Robert E. Lipsey, 1993. "The Effect of Multinational Firms' Operations on Their Domestic Employment," NBER Working Papers 2760, National Bureau of Economic Research, Inc.
  3. Blomström, Magnus & Fors, Gunnar & Lipsey, Robert E., 1997. "Foreign Direct Investment and Employment: Home Country Experience in the United States and Sweden," Working Paper Series 490, Research Institute of Industrial Economics.
  4. Arnold, Jens & Smarzynska Javorcik, Beata, 2005. "Gifted Kids or Pushy Parents? Foreign Acquisitions and Plant Performance in Indonesia," CEPR Discussion Papers 5065, C.E.P.R. Discussion Papers.
  5. Giovanni S. F. Bruno & Anna M. Falzoni, 1999. "Multinational Corporations, Wages and Employment: Do Adjustment Costs Matter?," Development Working Papers 130, Centro Studi Luca d\'Agliano, University of Milano.
  6. Jozef Konings & Olga Kupets & Hartmut Lehmann, 2002. "Gross Job Flows in Ukraine: Size, Ownership and Trade Effects," William Davidson Institute Working Papers Series 521, William Davidson Institute at the University of Michigan.
  7. Masso, Jaan & Eamets, Raul & Philips, Kaia, 2005. "Job Creation and Job Destruction in Estonia: Labour Reallocation and Structural Changes," IZA Discussion Papers 1707, Institute for the Study of Labor (IZA).
  8. Heshmati, Almas, 2000. "On the Growth of Micro and Small Firms," Working Paper Series in Economics and Finance 396, Stockholm School of Economics.
  9. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  10. Lopez-de-Silanes, Florencio & Markusen, James R. & Rutherford, Thomas F., 1996. "Trade policy subtleties with multinational firms," European Economic Review, Elsevier, vol. 40(8), pages 1605-1627, November.
  11. Ludo Cuyvers & Michel Dumont & Glenn Rayp & Katrien Stevens, 2005. "Home Employment Effects of EU Firms’ Activities in Central and Eastern European Countries," Open Economies Review, Springer, vol. 16(2), pages 153-174, April.
  12. Braconier, Henrik & Ekholm, Karolina, 2001. "Foreign Direct Investment in Central and Eastern Europe: Employment Effects in the EU," CEPR Discussion Papers 3052, C.E.P.R. Discussion Papers.
  13. Giorgio Barba Navaretti & Davide Castellani, 2003. "Investments Abroad and Performance at Home Evidence from Italian Multinationals," Development Working Papers 180, Centro Studi Luca d\'Agliano, University of Milano.
  14. Christian Bellak & Wilfried Altzinger, 1999. "Direct Versus Indirect FDI: Impact On Domestic Exports And Employment," Working Papers geewp09, Vienna University of Economics Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.
  15. Mary Amiti & Shang-Jin Wei, 2004. "Fear of Service Outsourcing: Is It Justified?," NBER Working Papers 10808, National Bureau of Economic Research, Inc.
  16. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-45, May.
  17. Braunerhjelm, Pontus & Oxelheim, Lars & Thulin, Per, 2005. "The Relationship Between Domestic and Outward Foreign Investment Revisited: The Impact of Industry-Specific Effects," Working Paper Series in Economics and Institutions of Innovation 35, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  18. Matthew J. Slaughter, 1995. "Multinational Corporations, Outsourcing, and American Wage Divergence," NBER Working Papers 5253, National Bureau of Economic Research, Inc.
  19. Edwin Leuven & Barbara Sianesi, 2003. "PSMATCH2: Stata module to perform full Mahalanobis and propensity score matching, common support graphing, and covariate imbalance testing," Statistical Software Components S432001, Boston College Department of Economics, revised 12 Feb 2014.
  20. Barbara Sianesi, 2001. "Propensity score matching," United Kingdom Stata Users' Group Meetings 2001 12, Stata Users Group, revised 23 Aug 2001.
  21. Braconier, Henrik & Ekholm, Karolina, 1999. "Swedish Multinationals and Competition from High- and Low-Wage Locations," CEPR Discussion Papers 2323, C.E.P.R. Discussion Papers.
  22. Faggio, Giulia & Konings, Jozef, 2003. "Job creation, job destruction and employment growth in transition countries in the 90s," Economic Systems, Elsevier, vol. 27(2), pages 129-154, June.
  23. Evans, David S, 1987. "The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 567-81, June.
  24. Caliendo, Marco & Kopeinig, Sabine, 2005. "Some Practical Guidance for the Implementation of Propensity Score Matching," IZA Discussion Papers 1588, Institute for the Study of Labor (IZA).
  25. Sianesi, Barbara, 2001. "An evaluation of the active labour market programmes in Sweden," Working Paper Series 2001:5, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  26. Pennings, Enrico & Sleuwaegen, Leo, 2000. "International relocation: firm and industry determinants," Economics Letters, Elsevier, vol. 67(2), pages 179-186, May.
  27. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  28. Urmas Varblane & Tonu Roolaht & Ele Reiljan & Rein Juriado, 2001. "Estonian Outward Foreign Direct Investments," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 9, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  29. Barba Navaretti, Giorgio & Castellani, Davide & Disdier, Anne-Célia, 2006. "How Does Investing in Cheap Labour Countries Affect Performance at Home? France and Italy," CEPR Discussion Papers 5765, C.E.P.R. Discussion Papers.
  30. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
  31. Slaughter, Matthew J., 2000. "Production transfer within multinational enterprises and American wages," Journal of International Economics, Elsevier, vol. 50(2), pages 449-472, April.
  32. Kristiina Huttunen, 2007. "The Effect of Foreign Acquisition on Employment and Wages: Evidence from Finnish Establishments," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 497-509, August.
  33. Robert E. Lipsey & Eric D. Ramstetter & Magnus Blomstrom, 2000. "Outward FDI and Parent Exports and Employment: Japan, the United States, and Sweden," NBER Working Papers 7623, National Bureau of Economic Research, Inc.
  34. Jeffrey D. Sachs & Howard J. Shatz, 1994. "Trade and Jobs in Manufacturing," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 1-84.
  35. Konings, Jozef & Murphy, Alan, 2001. "Do Multinational Enterprises Substitute Parent Jobs for Foreign Ones? Evidence from European Firm Level Panel Data," CEPR Discussion Papers 2972, C.E.P.R. Discussion Papers.
  36. Kokko, Ari, 2006. "The Home Country Effects Of Fdi In Developed Economies," EIJS Working Paper Series 225, The European Institute of Japanese Studies.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Jaan Masso & Tõnu Roolaht & Urmas Varblane, 2010. "Foreign Direct Investment And Innovation In Central And Eastern Europe: Evidence From Estonia," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 67, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  2. Clark Don P. & Highfill Jannett & de Oliveira Campino Jonas & Rehman Scheherazade S., 2011. "FDI, Technology Spillovers, Growth, and Income Inequality: A Selective Survey," Global Economy Journal, De Gruyter, vol. 11(2), pages 1-44, July.
  3. Huiqun Liu & Jinyong Lu, 2011. "The home-employment effect of FDI from developing countries: in the case of China," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 4(3), pages 173-182, October.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:mtk:febawb:52. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tonu Roolaht).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.