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Employment by foreign firms in the U.S.: Do state incentives matter?

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  • Rogers, Cynthia L.
  • Wu, Chen

Abstract

This study investigates the relationship between state-level attributes and employment of workers in the US by foreign owned firms (FDI-related employment, hereafter). In particular, we investigate the role of state-level business incentives in influencing the employment outcomes of foreign-owned manufacturing firms operating in the US. Using data from 50 states between 1999 and 2008, we employ a two-way fixed effects panel data framework and a dynamic system GMM approach to account for the dynamic features of employment outcomes. We also correct for potential measurement errors and potential endogeneity of policy variables. Our results suggest that state business incentives such as providing more foreign-trade zones (both general-purpose and subzones), the provision of better public services and establishing overseas offices in particular countries, have statistically significant effects on employment by foreign-owned firms in the US. The implications have direct bearing regarding the strategic use of investment-promotion policies in terms of employment effects.

Suggested Citation

  • Rogers, Cynthia L. & Wu, Chen, 2012. "Employment by foreign firms in the U.S.: Do state incentives matter?," Regional Science and Urban Economics, Elsevier, vol. 42(4), pages 664-680.
  • Handle: RePEc:eee:regeco:v:42:y:2012:i:4:p:664-680
    DOI: 10.1016/j.regsciurbeco.2012.04.006
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    Cited by:

    1. Nielsen, Bo Bernhard & Asmussen, Christian Geisler & Weatherall, Cecilie Dohlmann, 2017. "The location choice of foreign direct investments: Empirical evidence and methodological challenges," Journal of World Business, Elsevier, vol. 52(1), pages 62-82.
    2. repec:bpj:glecon:v:13:y:2017:i:1:p:14:n:2 is not listed on IDEAS

    More about this item

    Keywords

    State business-promotion policies; U.S. employment; Foreign direct investment; Agglomeration; Dynamic system GMM;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • F2 - International Economics - - International Factor Movements and International Business
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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