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Home Employment Effects of EU Firms' Activities in Central and Eastern European Countries

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Author Info
L. CUYVERS
M. DUMONT
G. RAYP ()
K. STEVENS

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Abstract

We study to what extent factor demand in EU parent firms and countries is affected by FDI and affiliate production in the Central and Eastern European countries (CEEC). Since FDI may exert a direct as well as an indirect influence on factor demand, its effect on the investing firm level and the sector level may differ and hence we estimate both. Using the Amadeus database, we construct a dataset for a large number of EU countries, which allows us to perform the estimations for a number of manufacturing sectors separately, following a flexible cost function approach. We find evidence of inter-sector heterogeneity of the effect of FDI on parent firm labor demand, but not a substantial higher impact in ''lower-skilled'' intensive sectors. Our estimations of the factor demand effect of FDI at the sector level confirmed these observations at the investing firm level. Hence, we find that labor demand in the EU is affected from investment in the CEEC. This effect has a significant sector as well as a non-sector component, which are more or less similar in size. The omission of the non-sector component may consequently tend to underestimate the impact of FDI on home country employment.

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Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 02/158.

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Length: 32 pages
Date of creation: Nov 2002
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Handle: RePEc:rug:rugwps:02/158

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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.:
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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. Kokko, Ari, 2006. "The Home Country Effects Of Fdi In Developed Economies," EIJS Working Paper Series 225, The European Institute of Japanese Studies. [Downloadable!]
  2. Dumont M., 2006. "The Social Consequences of Economic Globalization," Working Papers 2006025, University of Antwerp, Faculty of Applied Economics. [Downloadable!]
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