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Exporting, FDI, and Labour Demand Adjustment: Evidence from the UK Manufacturing

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Abstract

This paper documents evidence of differential speed of labour demand adjustment among exporters, foreign multinationals (henceforth MNEs) and domestic non-exporting firms from the UK manufacturing industry. Our findings show that MNEs exhibit the fastest speed of employment adjustment to its optimal level, followed by exporters and then domestic non-exporters. Interestingly, the long-run adjustment of labour demand with respect to factor price and demand shocks is less pronounced amongst MNEs and exporters, consistent with the view that firms engaged in international commerce activities generate more skilled jobs that are more costly to dispose of. Moreover, exporting intensity also seems to matter; MNEs with limited export-market commitment are found to have more rigid labour adjustment in response to output and wages shocks in the long run. These findings may allay fears on the footloose nature of MNEs in the sense that jobs in MNEs (followed by exporters) are expected to be more secure on average in response to any shocks affecting long-run labour demand.

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  • Q Li & S Girma, "undated". "Exporting, FDI, and Labour Demand Adjustment: Evidence from the UK Manufacturing," Working Papers 2006_18, Business School - Economics, University of Glasgow.
  • Handle: RePEc:gla:glaewp:2006_18
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    More about this item

    Keywords

    foreign direct investment (FDI); exports; employment adjustment;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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