IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

The Effects of Direct Foreign Investment on Local Communities

  • David N. Figlio
  • Bruce A. Blonigen

The large increase in direct foreign investment (DFI) into the United States in the late 1980s has generated considerable research on why these flows occurred and where these foreign firms located. However, very little has been done to evaluate the impact these foreign firms have on the local communities in which they locate. As a first step in addressing this topic, we use detailed county-level panel data from South Carolina across 5 year intervals from 1980 through 1995 to investigate the effect of foreign manufacturing firms on local labor markets and on the level and distribution of local government budgets. We find that manufacturing employment by foreign firms has a substantial impact on industry wages and county budgets which is significantly different from domestic manufacturing employment. With respect to wages, we find that while increased manufacturing employment generally increases county wages in an average two-digit industry, this effect is more than seven times larger when the employment growth comes from a foreign firm, rather than a domestic one. On the budget side, we find that foreign employment leads to larger declines in per capita revenues and expenditures at the county level, and to significant redistribution of county expenditures away from public school funding and toward transportation and public safety.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7274.

in new window

Date of creation: Jul 1999
Date of revision:
Publication status: published as Figlio, David N. and Bruce A. Blonigen. "The Effects Of Foreign Direct Investment On Local Communities," Journal of Urban Economics, 2000, v48(2,Sep), 338-363.
Handle: RePEc:nbr:nberwo:7274
Note: ITI
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. 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.
  2. Brian Aitken & Ann Harrison & Robert E. Lipsey, 1995. "Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela and the United States," NBER Working Papers 5102, National Bureau of Economic Research, Inc.
  3. Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
  4. Topel, Robert H, 1986. "Local Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S111-43, June.
  5. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle.
  6. Blonigen, Bruce A & Figlio, David N, 1998. "Voting for Protection: Does Direct Foreign Investment Influence Legislator Behavior?," American Economic Review, American Economic Association, vol. 88(4), pages 1002-14, September.
  7. Coughlin, Cletus C & Terza, Joseph V & Arromdee, Vachira, 1991. "State Characteristics and the Location of Foreign Direct Investment within the United States," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 675-83, November.
  8. Timothy J. Bartik, 2003. "Local Economic Development Policies," Upjohn Working Papers and Journal Articles 03-91, W.E. Upjohn Institute for Employment Research.
  9. Keith Head & John Ries & Deborah Swenson, 1994. "Agglomeration Benefits and Location Choice: Evidence from Japanese Manufacturing Investment in the United States," NBER Working Papers 4767, National Bureau of Economic Research, Inc.
  10. Figlio, David N., 1997. "Teacher salaries and teacher quality," Economics Letters, Elsevier, vol. 55(2), pages 267-271, August.
  11. Norman J. Glickman & Douglas P. Woodward, 1988. "The Location of Foreign Direct Investment in the United States: Patterns and Determinants," International Regional Science Review, , vol. 11(2), pages 137-154, August.
  12. Blomström, Magnus & Kokko, Ari, 1994. "Home Country Effects of Foreign Direct Investment: Evidence from Sweden," CEPR Discussion Papers 931, C.E.P.R. Discussion Papers.
  13. Edward M. Graham & Paul Krugman, 1995. "Foreign Direct Investment in the United States, 3rd Edition," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 52.
  14. Bhagwati, Jagdish N & Dinopoulos, Elias & Wong, Kar-yiu, 1992. "Quid Pro Quo Foreign Investment," American Economic Review, American Economic Association, vol. 82(2), pages 186-90, May.
  15. Steven Globerman & John C. Ries & Ilan Vertinsky, 1994. "The Economic Performance of Foreign Affiliates in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 27(1), pages 143-56, February.
  16. David G. Terkla & Peter B. Doeringer, 1991. "Explaining variations in employment growth: Structural and cyclical change among states and local areas," Journal of Urban Economics, Elsevier, vol. 29(3), pages 329-348, May.
  17. Mark E. Doms & J . Bradford Jensen, 1998. "Comparing Wages, Skills, and Productivity between Domestically and Foreign-Owned Manufacturing Establishments in the United States," NBER Chapters, in: Geography and Ownership as Bases for Economic Accounting, pages 235-258 National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:7274. 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: ()

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.