German Foreign Direct Investment and Wages
Over the last decade, German multinationals created about two million jobs abroad with increasing foreign direct investment (FDI). While there are many reasons for firms to go multinational and probably just as many for Germany's high unemployment, this paper aims to investigate the relationship between domestic labour costs and foreign direct investment. We apply a theoretical model for an econometric analysis examining the determinants of FDI using panel data of German firms' foreign capital stocks in 22 countries between 1994 and 2003. Estimating elasticities, we find that while domestic wages do not significantly influence total FDI by German firms, they positively affect the FDI stock in countries where cheap labour is abundant. Thus, although Germany's high labour costs are not the sole driver of foreign direct investment, they may accelerate the outsourcing of German jobs.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: ++49 351 463 2196
Fax: ++49 351 463 7739
Web page: http://www.tu-dresden.de/wiwi/
More information through EDIRC
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.:
- Bruce Blonigen, 2005.
"A Review of the Empirical Literature on FDI Determinants,"
Atlantic Economic Journal,
International Atlantic Economic Society, vol. 33(4), pages 383-403, December.
- Bruce A. Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," NBER Working Papers 11299, National Bureau of Economic Research, Inc.
- Broll, Udo & Zilcha, Itzhak, 1991.
"Exchange rate uncertainty, futures markets and the multinational firm,"
Discussion Papers, Series II
139, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
- Broll, Udo & Zilcha, Itzhak, 1992. "Exchange rate uncertainty, futures markets and the multinational firm," European Economic Review, Elsevier, vol. 36(4), pages 815-826, May.
- Helpman, Elhanan, 1984.
"A Simple Theory of International Trade with Multinational Corporations,"
Journal of Political Economy,
University of Chicago Press, vol. 92(3), pages 451-71, June.
- Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Scholarly Articles 3445092, Harvard University Department of Economics.
- James R. Markusen, 2004.
"Multinational Firms and the Theory of International Trade,"
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262633078, June.
- Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
- Arijit Mukherjee & Udo Broll, 2007. "Welfare Effects of Foreign Direct Investment: Cost Saving vs. Signaling," Journal of Economics, Springer, vol. 90(1), pages 29-43, January.
- Udo Broll & Kit Wong, 2006. "Multinationals, Hedging, and Capital Structure under Exchange Rate Uncertainty," Open Economies Review, Springer, vol. 17(1), pages 103-114, January.
- Sung, Hongmo & Lapan, Harvey E, 2000.
"Strategic Foreign Direct Investment and Exchange-Rate Uncertainty,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(2), pages 411-23, May.
- Sung, Hongmo & Lapan, Harvey E., 2000. "Strategic Foreign Direct Investment and Exchange Rate Uncertainty," Staff General Research Papers 1335, Iowa State University, Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:zbw:tuddps:1007. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.