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The effects at home of initiating production abroad: evidence from matched French firms

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  • Alexander Hijzen
  • Sébastien Jean
  • Thierry Mayer

Abstract

Based on matching techniques in combination with a difference-in-difference estimator, this paper estimates the effects at home of initiating production abroad through the establishment of a foreign production affiliate. The analysis covers manufacturing and service firms active in France during the period 1987-1999. We show that the motivation to start producing abroad is an important determinant of its impact at home. Market-seeking FDI in manufacturing is associated with significant scale effects, resulting in job creation. By contrast, factor-seeking FDI in manufacturing has no significant effect on employment. However, there is some evidence that this type of FDI is associated with technology effects, in the form of greater capital-intensity and efficiency, as well as larger exports. Finally, FDI in service sectors is associated with significant positive employment effects, presumably reflecting the importance of the market-seeking motive in these sectors.
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  • Alexander Hijzen & Sébastien Jean & Thierry Mayer, 2011. "The effects at home of initiating production abroad: evidence from matched French firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(3), pages 457-483, September.
  • Handle: RePEc:spr:weltar:v:147:y:2011:i:3:p:457-483
    DOI: 10.1007/s10290-011-0094-x
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    More about this item

    Keywords

    Foreign direct investment; Multinationals; Propensity score matching; Services; Delocalisation; F14; F21; F23;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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