Does Relocation of Economic Activities Hurt Labour in the Home Country?
In many industrialised economies, there is growing concern about the relocation of economic activities abroad. This paper analyses whether this concern is justified. The authors show that theory predicts ambiguous effects of relocation on (the employment and production levels of) the country of origin. Therefore, whether such effects are positive or negative is an empirical question. A survey of empirical works shows no convincing evidence that outward foreign investment is harmful. Rather, there often exist complementarities between foreign and home production, so that investing abroad might actually increase domestic production and employment.
Volume (Year): 60 (2001)
Issue (Month): 1 (June)
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