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Does foreign investment hurt job creation at home? The geography of outward FDI and employment in the USA

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  • Crescenzi, Riccardo
  • Ganau, Roberto
  • Storper, Michael

Abstract

Rising political skepticism on the benefits of global economic integration has increased public scrutiny of the foreign activities of domestic firms in virtually all advanced economies. Decisions to invest in new activities abroad are seen by some commentators as potentially detrimental to domestic employment. We contribute to this debate by scrutinizing the relationship between outward ‘greenfield’ Foreign Direct Investments (FDI) and local employment levels. The analysis, at the scale of USA Economic Areas, finds a generally positive link between outward investment and local employment, but with an important range of differences across regions and sectors. Less developed regions benefit the most from the positive returns of outward FDI, and, particularly, from outward FDI if it is undertaken by firms in high-tech manufacturing and services industries. But there is a downside, in the form of increasing intra-regional inequalities between high-skilled and low-skilled workers in these areas.

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  • Crescenzi, Riccardo & Ganau, Roberto & Storper, Michael, 2022. "Does foreign investment hurt job creation at home? The geography of outward FDI and employment in the USA," LSE Research Online Documents on Economics 109864, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:109864
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    2. Ganau, Roberto & Kilroy, Austin, 2023. "Detecting economic growth pathways in the EU’s lagging regions," LSE Research Online Documents on Economics 115162, London School of Economics and Political Science, LSE Library.
    3. Yang Ruilin & Bathelt Harald, 2023. "How outward FDIs affect income: experiences from Chinese city-regions," ZFW – Advances in Economic Geography, De Gruyter, vol. 67(1), pages 47-64, May.

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    More about this item

    Keywords

    internationalization; outward FDI; employment; economic areas; USA; The research leading to these results has received funding from the European Research Council under the European Union Horizon 2020 Programme H2020/2014-2020 (Grant Agreement n 639633-MASSIVE-ERC-2014-STG); OUP deal;
    All these keywords.

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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