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Fragmentation, Efficiency-Seeking FDI, and Employment

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  • Carsten Eckel

    () (University of Passau, Germany)

Abstract

The paper examines the impact of efficiency-seeking FDI on factor prices, employment, and output. The analysis shows that when transportation costs fall, companies start relocating labor-intensive production processes to low-wage countries. But this does not necessarily hurt workers in the high-wage country. The paper demonstrates an employment-depressing "relocation effect" and an employment-enhancing "efficiency effect." Employment is more likely to rise if the internationality of production is high and if the supply of capital is elastic. Furthermore, the model is capable of explaining intra industry cross-hauling. Copyright Blackwell Publishing Ltd 2003..

Suggested Citation

  • Carsten Eckel, 2003. "Fragmentation, Efficiency-Seeking FDI, and Employment," Review of International Economics, Wiley Blackwell, vol. 11(2), pages 317-331, May.
  • Handle: RePEc:bla:reviec:v:11:y:2003:i:2:p:317-331
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    References listed on IDEAS

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    1. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
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    Cited by:

    1. Bruce Blonigen & Rossitza B. Wooster, 2003. "CEO Turnover and Foreign Market Participation," NBER Working Papers 9527, National Bureau of Economic Research, Inc.
    2. Chiara Franco & Francesco Rentocchini & Giuseppe Vittucci Marzetti, 2008. "Why do firms invest abroad? An analysis of the motives underlying Foreign Direct Investments," Department of Economics Working Papers 0817, Department of Economics, University of Trento, Italia.
    3. Yousafzai, Arshad Hayat, 2014. "Exploring the Causality and Co-integration Relationship between FDI, GDP and Employment: A Case of Czech Republic," MPRA Paper 54827, University Library of Munich, Germany.
    4. Davies, Ronald B., 2005. "Fragmentation of headquarter services and FDI," The North American Journal of Economics and Finance, Elsevier, vol. 16(1), pages 61-79, March.
    5. Barthel, Fabian & Busse, Matthias & Osei, Robert, 2008. "The characteristics and determinants of FDI in Ghana," HWWI Research Papers 2-15, Hamburg Institute of International Economics (HWWI).
    6. Fabian Barthel & Matthias Busse & Robert Osei, 2011. "The Characteristics and Determinants of FDI in Ghana," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 23(3), pages 389-408, July.

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