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Investment abroad and adjustment at home: evidence from UK multinational firms

  • Helen Simpson

    ()

    (Institute for Fiscal Studies and CMPO, Bristol)

I use within-firm, plant-level data combined with geographic information on firms' overseas operations to examine how investment in low-wage economies affects firms' home-country operations. To remain close to theory I focus on changes in firms' organisational and industrial structure driven by plant closures. As predicted by models of vertical multinationals I find that investment in relatively low-wage economies is associated with plant closures in relatively low-skill, labour-intensive industries in the UK. The findings are of interest in the context of the relaxation of barriers to inward investment in low-wage economies.

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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W07/07.

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Date of creation: Mar 2007
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Handle: RePEc:ifs:ifsewp:07/07
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  1. Pol Antras & Elhanan Helpman, 2003. "Global Sourcing," Harvard Institute of Economic Research Working Papers 2005, Harvard - Institute of Economic Research.
  2. Andrew B. Bernard & J. Bradford Jensen, 2006. "Firm Structure, Multinationals, and Manufacturing Plant Deaths," Working Paper Series WP06-7, Peterson Institute for International Economics.
  3. Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
  4. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-45, May.
  5. Alexander Hijzen & Holger Görg & Robert C. Hine, 2005. "International Outsourcing and the Skill Structure of Labour Demand in the United Kingdom," Economic Journal, Royal Economic Society, vol. 115(506), pages 860-878, October.
  6. Griffith, Rachel & Redding, Stephen J. & Simpson, Helen, 2004. "Foreign Ownership and Productivity: New Evidence from the Service Sector and the R&D Lab," CEPR Discussion Papers 4691, C.E.P.R. Discussion Papers.
  7. Muendler, Marc-Andreas & Becker, Sascha O., 2006. "Margins of Multinational Labor Substitution," IZA Discussion Papers 2131, Institute for the Study of Labor (IZA).
  8. Griffith, Rachel, 1999. "Using the ARD Establishment Level Data to Look at Foreign Ownership and Productivity in the United Kingdom," Economic Journal, Royal Economic Society, vol. 109(456), pages F416-42, June.
  9. G–rg, Holger & Eric Strobl, 2002. ""Footloose" Multinationals?," Royal Economic Society Annual Conference 2002 89, Royal Economic Society.
  10. Richard Disney & Jonathan Haskel & Ylva Heden, 2003. "Entry, Exit and Establishment Survival in UK Manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 51(1), pages 91-112, 03.
  11. Braconier, Henrik & Ekholm, Karolina, 1999. "Swedish Multinationals and Competition from High- and Low-Wage Locations," Working Paper Series 523, Research Institute of Industrial Economics.
  12. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2003. "Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of US Manufacturing Plants," Working Paper Series WP03-3, Peterson Institute for International Economics.
  13. Pol Antràs, 2003. "Firms, Contracts, And Trade Structure," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1375-1418, November.
  14. Gordon H. Hanson & Raymond J. Mataloni & Matthew J. Slaughter, 2003. "Vertical Production Networks in Multinational Firms," NBER Working Papers 9723, National Bureau of Economic Research, Inc.
  15. John Whalley & Xian Xin, 2006. "China's FDI and Non-FDI Economies and the Sustainability of Future High Chinese Growth," NBER Working Papers 12249, National Bureau of Economic Research, Inc.
  16. Chiara Criscuolo & Ralf Martin, 2005. "Multinationals and US productivity leadership: evidence from Great Britain," LSE Research Online Documents on Economics 19914, London School of Economics and Political Science, LSE Library.
  17. Lee Branstetter & Nicholas Lardy, 2006. "China's Embrace of Globalization," NBER Working Papers 12373, National Bureau of Economic Research, Inc.
  18. Richard Disney & Jonathan Haskel & Ylva Heden, 2003. "Restructuring and productivity growth in uk manufacturing," Economic Journal, Royal Economic Society, vol. 113(489), pages 666-694, 07.
  19. Helpman, Elhanan, 1985. "Multinational Corporations and Trade Structure," Review of Economic Studies, Wiley Blackwell, vol. 52(3), pages 443-57, July.
  20. Venables, Anthony J., 1999. "Fragmentation and multinational production," European Economic Review, Elsevier, vol. 43(4-6), pages 935-945, April.
  21. Francesca Fabbri & Jonathan E. Haskel & Matthew J. Slaughter, 2003. "Does Nationality Of Ownership Matter For Labor Demands?," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 698-707, 04/05.
  22. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  23. Linda Low & Eric D. Ramstetter & Henry Wai-Chung Yeung, 1996. "Accounting for Outward Direct Investment from Hong Kong and Singapore: Who Controls What?," NBER Working Papers 5858, National Bureau of Economic Research, Inc.
  24. repec:hrv:faseco:4784029 is not listed on IDEAS
  25. S. Lael Brainard & David A. Riker, 1997. "Are U.S. Multinationals Exporting U.S. Jobs?," NBER Working Papers 5958, National Bureau of Economic Research, Inc.
  26. Head, Keith & Ries, John, 2002. "Offshore production and skill upgrading by Japanese manufacturing firms," Journal of International Economics, Elsevier, vol. 58(1), pages 81-105, October.
  27. Stephen Ross Yeaple, 2003. "The Role of Skill Endowments in the Structure of U.S. Outward Foreign Direct Investment," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 726-734, August.
  28. Dunne, T. & Roberts, M.J. & Samuelson, L., 1988. "The Growth And Failure Of U.S. Manufacturing Plants," Papers 1-87-5, Pennsylvania State - Department of Economics.
  29. David A. Riker & S. Lael Brainard, 1997. "U.S. Multinationals and Competition from Low Wage Countries," NBER Working Papers 5959, National Bureau of Economic Research, Inc.
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