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Investment abroad and labour adjustment at home: evidence from UK multinational firms


  • Helen Simpson


This paper provides new evidence on the effects of overseas FDI on the skill-mix of multinational firms' home-country operations. The analysis exploits China's WTO accession to identify the impact of outward investment into a low-wage economy and uses plant-level data to investigate changes in industrial structure within firms driven by plant closures. As predicted by models of vertical FDI, the paper demonstrates that overseas investment in low-wage economies is associated with asymmetric effects on workers in low- and high-skill industries in the home economy and, in particular, with firms closing down plants in low-skill industries. JEL classification: F2

Suggested Citation

  • Helen Simpson, 2012. "Investment abroad and labour adjustment at home: evidence from UK multinational firms," Canadian Journal of Economics, Canadian Economics Association, vol. 45(2), pages 698-731, May.
  • Handle: RePEc:cje:issued:v:45:y:2012:i:2:p:698-731

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    References listed on IDEAS

    1. Strauss-Kahn, Vanessa & Vives, Xavier, 2009. "Why and where do headquarters move?," Regional Science and Urban Economics, Elsevier, vol. 39(2), pages 168-186, March.
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    Cited by:

    1. Bernhard Dachs & Bernd Ebersberger & Steffen Kinkel & Oliver Som, 2015. "The effects of production offshoring on R&D and innovation in the home country," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(1), pages 9-31, March.
    2. Tsou, Meng-Wen & Liu, Jin-Tan & Hammitt, James K. & Chang, Ching-Fu, 2013. "The impact of foreign direct investment in China on employment adjustments in Taiwan: Evidence from matched employer–employee data," Japan and the World Economy, Elsevier, vol. 25, pages 68-79.

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    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business


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