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Foreign direct investment and search unemployment : Theory and evidence

  • Schmerer, Hans-Jörg


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

"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))

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Paper provided by Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] in its series IAB Discussion Paper with number 201204.

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Length: 32 pages
Date of creation: 01 Mar 2012
Date of revision:
Publication status: published in: International Review of Economics and Finance, Vol. 30, No. March (2014), p. 41-56
Handle: RePEc:iab:iabdpa:201204
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