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Does Where You Go Matter? The Impact of Outward Foreign Direct Investment on Multinationals' Employment at Home

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  • Debaere, Peter
  • Lee, Hongshik
  • Lee, Joonhyung

Abstract

How does outward foreign direct investment (FDI) affect employment growth of the multinationals (MNCs) in the home country? Does the impact of outward investment differ by the level of development of the destination country of the FDI? Using a difference-in-difference approach, we assess the impact of starting to invest in less advanced countries, of investing in more advanced countries, and of changing the direction of one’s investment from more to less advanced nations. To obtain suitable control groups in each case, we use the propensity score method to select national firms that ex post did not make investment decisions even though ex ante they would have been equally likely to each multinational. We find that moving to less advanced countries (as an initial foreign investment or as a redirection of previous investment) decreases a company’s employment growth rate. On the other hand, moving to more advanced countries does not affect employment growth in any significant way.

Suggested Citation

  • Debaere, Peter & Lee, Hongshik & Lee, Joonhyung, 2006. "Does Where You Go Matter? The Impact of Outward Foreign Direct Investment on Multinationals' Employment at Home," CEPR Discussion Papers 5737, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:5737
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    References listed on IDEAS

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    Cited by:

    1. Lundan, Sarianna M., 2007. "The Home Country Effects of Internationalisation," Discussion Papers 1100, The Research Institute of the Finnish Economy.
    2. Marc-Andreas Muendler & Sascha O. Becker, 2010. "Margins of Multinational Labor Substitution," American Economic Review, American Economic Association, vol. 100(5), pages 1999-2030, December.
    3. Blanas, Sotiris, 2012. "Intra-firm trade and employment in US manufacturing," Kiel Advanced Studies Working Papers 458, Kiel Institute for the World Economy (IfW).
    4. Cesare Imbriani & Rosanna Pittiglio & Filippo Reganati, 2014. "Affiliates and parent employment through foreign direct investment: a study case of substitutability or complementarity," International Economics and Economic Policy, Springer, vol. 11(4), pages 619-638, December.
    5. Muendler, Marc A & Becker, Sascha O., 2006. "The Effect of FDI on Job Separation," University of California at San Diego, Economics Working Paper Series qt28h3p82z, Department of Economics, UC San Diego.
    6. Mayer, T. & Mejean, I. & Nefussi, B., 2010. "The location of domestic and foreign production affiliates by French multinational firms," Journal of Urban Economics, Elsevier, vol. 68(2), pages 115-128, September.
    7. Codruța Dura & Oana Dobre-Baron, 2011. "Analysis of Foreign Direct Investments Engaged by Japanese Multinational Companies," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 11(2), pages 81-92.
    8. Giorgio Barba Navaretti & Davide Castellani & Anne-Célia Disdier, 2006. "How Does Investing in Cheap Labour Countries Affect Performance at Home? France and Italy," Development Working Papers 215, Centro Studi Luca d'Agliano, University of Milano.
    9. Liu, Wan-Hsin & Nunnenkamp, Peter, 2011. "Domestic Repercussions of Different Types of FDI: Firm-Level Evidence for Taiwanese Manufacturing," World Development, Elsevier, vol. 39(5), pages 808-823, May.
    10. KODAMA Naomi & INUI Tomohiko, 2015. "The Impact of Globalization on Establishment-Level Employment Dynamics in Japan," Discussion papers 15002, Research Institute of Economy, Trade and Industry (RIETI).
    11. Alexander HIJZEN & INUI Tomohiko & TODO Yasuyuki, 2007. "The Effects of Multinational Production on Domestic Performance: Evidence from Japanese Firms," Discussion papers 07006, Research Institute of Economy, Trade and Industry (RIETI).
    12. Alireza Naghavi & Gianmarco Ottaviano, 2009. "Offshoring and product innovation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(3), pages 517-532, March.
    13. Davide Castellani & Ilaria Mariotti & Lucia Piscitello, 2006. "Outward investments and skill upgrading. Evidence from the Italian case," KITeS Working Papers 185, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Nov 2006.
    14. repec:wfo:wstudy:41155 is not listed on IDEAS

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    Keywords

    multinationals;

    JEL classification:

    • F1 - International Economics - - Trade

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