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Does Relocation of Economic Activities Hurt Labour in the Home Country?


  • Chiara Fumagalli

    () (Bocconi University)

  • Massimo Motta

    () (European University Institute)


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.

Suggested Citation

  • Chiara Fumagalli & Massimo Motta, 2001. "Does Relocation of Economic Activities Hurt Labour in the Home Country?," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 60(1), pages 97-133, June.
  • Handle: RePEc:gde:journl:gde_v60_n1_p97-133

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    outward FDI; globalization; home unemployment;

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business


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