IDEAS home Printed from https://ideas.repec.org/p/iab/iabdpa/201204.html
   My bibliography  Save this paper

Foreign direct investment and search unemployment : Theory and evidence

Author

Listed:
  • Schmerer, Hans-Jörg

    () (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])

Abstract

"This paper proposes a simple multi-industry trade model with search frictions in the labor market. Unimpeded access to global financial markets enables capital owners to invest abroad, thereby fostering unemployment at the extensive industry margin. Whether a country benefits from FDI in terms of unemployment depends on the respective country's net-FDI, measured as the difference between in- and outward FDI. The derived FDI and unemployment nexus is tested employing macroeconomic data for 19 OECD countries on unemployment, FDI, and labor market institutions. Results support the model in that net-FDI is robustly associated with lower rates of aggregate unemployment." (Author's abstract, IAB-Doku) ((en))

Suggested Citation

  • Schmerer, Hans-Jörg, 2012. "Foreign direct investment and search unemployment : Theory and evidence," IAB Discussion Paper 201204, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    • Handle: RePEc:iab:iabdpa:201204
    as

    Download full text from publisher

    File URL: http://doku.iab.de/discussionpapers/2012/dp0412.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    2. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2011. "Trade and unemployment: What do the data say?," European Economic Review, Elsevier, vol. 55(6), pages 741-758, August.
    3. Elhanan Helpman & Oleg Itskhoki, 2010. "Labour Market Rigidities, Trade and Unemployment," Review of Economic Studies, Oxford University Press, vol. 77(3), pages 1100-1137.
    4. Davidson, Carl & Matusz, Steven J. & Shevchenko, Andrei, 2008. "Outsourcing Peter To Pay Paul: High-Skill Expectations And Low-Skill Wages With Imperfect Labor Markets," Macroeconomic Dynamics, Cambridge University Press, vol. 12(4), pages 463-479, September.
    5. Dutt, Pushan & Mitra, Devashish & Ranjan, Priya, 2009. "International trade and unemployment: Theory and cross-national evidence," Journal of International Economics, Elsevier, vol. 78(1), pages 32-44, June.
    6. Hartmut Egger & Udo Kreickemeier, 2017. "Firm Heterogeneity and the Labor Market Effects of Trade Liberalization," World Scientific Book Chapters, in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 10, pages 265-306, World Scientific Publishing Co. Pte. Ltd..
    7. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2011. "Globalization and labor market outcomes: Wage bargaining, search frictions, and firm heterogeneity," Journal of Economic Theory, Elsevier, vol. 146(1), pages 39-73, January.
    8. Costain, James S. & Reiter, Michael, 2008. "Business cycles, unemployment insurance, and the calibration of matching models," Journal of Economic Dynamics and Control, Elsevier, vol. 32(4), pages 1120-1155, April.
    9. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2010. "Inequality and Unemployment in a Global Economy," Econometrica, Econometric Society, vol. 78(4), pages 1239-1283, July.
    10. Hartmut Egger & Udo Kreickemeier, 2017. "Firm Heterogeneity and the Labor Market Effects of Trade Liberalization," World Scientific Book Chapters, in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 10, pages 265-306, World Scientific Publishing Co. Pte. Ltd..
    11. Kohler, Wilhelm & Wrona, Jens, 2011. "Offshoring tasks, yet creating jobs?," University of Tuebingen Working Papers in Economics and Finance 12, University of Tuebingen, Faculty of Economics and Social Sciences.
    12. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1988. "The Structure of Simple General Equilibrium Models with Frictional Unemployment," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1267-1293, December.
    13. Andrea Bassanini & Romain Duval, 2009. "Unemployment, institutions, and reform complementarities: re-assessing the aggregate evidence for OECD countries," Oxford Review of Economic Policy, Oxford University Press, vol. 25(1), pages 40-59, Spring.
    14. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
    15. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-839, December.
    16. Mitra, Devashish & Ranjan, Priya, 2010. "Offshoring and unemployment: The role of search frictions labor mobility," Journal of International Economics, Elsevier, vol. 81(2), pages 219-229, July.
    17. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2010. "Unequal Effects of Trade on Workers with Different Abilities," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 421-433, 04-05.
    18. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877.
    19. Bakhtiari, Sasan, 2012. "Offshoring, wages and the growing skill gap: Advocating offshoring without sectoral reallocation," International Review of Economics & Finance, Elsevier, vol. 23(C), pages 46-58.
    20. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    21. Felbermayr, Gabriel J. & Larch, Mario & Lechthaler, Wolfgang, 2012. "Endogenous labor market institutions in an open economy," International Review of Economics & Finance, Elsevier, vol. 23(C), pages 30-45.
    22. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, vol. 48(2), pages 271-299, August.
    23. Mei-Yin Lin & Jue-Shyan Wang, 2008. "Capital outflow and unemployment: evidence from panel data," Applied Economics Letters, Taylor & Francis Journals, vol. 15(14), pages 1135-1139.
    24. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-494, June.
    25. Schmerer, Hans-Jörg, 2012. "Skill-biased labor market reforms and international competitiveness," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 6, pages 1-39.
    26. Davidson, Carl & Matusz, Steven J., 2012. "A model of globalization and firm-worker matching: How good is good enough?," International Review of Economics & Finance, Elsevier, vol. 23(C), pages 5-15.
    27. Richard A. Brecher, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 88(1), pages 98-116.
    28. Wilhelm Kohler & Jens Wrona, 2010. "Offshoring Tasks, yet Creating Jobs?," CESifo Working Paper Series 3019, CESifo Group Munich.
    29. Paul Conway & Donato de Rosa & Giuseppe Nicoletti & Faye Steiner, 2006. "Regulation, Competition and Productivity Convergence," OECD Economics Department Working Papers 509, OECD Publishing.
    30. Mark P. Moore & Priya Ranjan, 2005. "Globalisation vs Skill-Biased Technological Change: Implications for Unemployment and Wage Inequality," Economic Journal, Royal Economic Society, vol. 115(503), pages 391-422, April.
    31. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
    32. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Münich, Daniel & Srholec, Martin & Moritz, Michael & Schäffler, Johannes, 2012. "Mothers and Daughters: Heterogeneity of German direct investments in the Czech Republic. Evidence from the IAB-ReLOC survey," IAB Discussion Paper 201217, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    2. Schmerer, Hans-Jörg, 2012. "FDI, skill-specific unemployment, and institutional spillover effects," Economics Discussion Papers 2012-2, Kiel Institute for the World Economy (IfW).
    3. Wolfgang Dauth & Sebastian Findeisen & Jens Suedekum, 2014. "The Rise Of The East And The Far East: German Labor Markets And Trade Integration," Journal of the European Economic Association, European Economic Association, vol. 12(6), pages 1643-1675, December.
    4. Chella, Namapsa & Phiri, Andrew, 2017. "Long-run cointegration between foreign direct investment, direct investment and unemployment in South Africa," MPRA Paper 82371, University Library of Munich, Germany.
    5. Engelmann, Sabine, 2012. "International trade, technical change and wage inequality in the U.K. economy," IAB Discussion Paper 201208, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    6. Poeschel, Friedrich, 2012. "Assortative matching through signals," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62061, Verein für Socialpolitik / German Economic Association.
    7. Deeke, Axel & Baas, Meike, 2012. "Berufliche Statusmobilität von Arbeitslosen nach beruflicher Weiterbildung : ein empirischer Beitrag zur Evaluation der Förderung beruflicher Weiterbildung," IAB Discussion Paper 201211, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    8. Schmerer, Hans-Jörg, 2012. "Skill-biased labor market reforms and international competitiveness," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 6, pages 1-39.
    9. Drasch, Katrin, 2012. "Between familial imprinting and institutional regulation: Family related employment interruptions of women in Germany before and after the German reunification," IAB Discussion Paper 201209, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    10. Djordjevic, Suzana & Ivanovic, Zoran & Bogdan, Sinisa, 2015. "Direct Foreign Investments And The Lack Of Positive Effects On The Economy," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 6(2), pages 197-208.
    11. Kröll, Alexandra & Farhauer, Oliver, 2012. "Examining the roots of homelessness: The impact of regional housing market conditions and the social environment on homelessness in North Rhine-Westphalia, Germany," IAB Discussion Paper 201213, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    12. repec:eco:journ1:2019-02-19 is not listed on IDEAS
    13. Mendolicchio Concetta & Paolini Dimitri & Pietra Tito, 2012. "Asymmetric Information And Overeducation," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-29, October.
    14. Erdogan, Ayse M., 2014. "Bilateral trade and the environment: A general equilibrium model based on new trade theory," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 52-71.

    More about this item

    Keywords

    Auslandsinvestitionen; Beschäftigungseffekte - internationaler Vergleich; Sucharbeitslosigkeit; Außenhandel; institutionelle Faktoren; Arbeitsmarktpolitik; friktionelle Arbeitslosigkeit; Wirtschaftszweige; Arbeitslosenquote; Arbeitskräftenachfrage; OECD;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iab:iabdpa:201204. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (IAB, Geschäftsbereich Dokumentation und Bibliothek). General contact details of provider: http://edirc.repec.org/data/iabbbde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.