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The Effects at Home of Initiating Production Abroad: Evidence from Matched French Firms

  • Alexander Hijzen
  • Sébastien Jean
  • Thierry Mayer

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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Paper provided by CEPII research center in its series Working Papers with number 2009-39.

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Date of creation: Dec 2009
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Handle: RePEc:cii:cepidt:2009-39
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