Foreign Direct Investment, Search Unemployment, and the Role of Labor Market Institutions
This paper proposes a simple multi-industry trade model with search frictions in the labor market. It will be shown that the reallocation of capital across countries in formof FDI leads to changes in unemployment at the extensive and intensive industry margins. Whether a country benefits from FDI highly depends on the respective country’s net-FDI flows. Unilateral changes in labor market institutions trigger spillover effects induced by a reallocation of industries across countries, which affects labor markets in all economies integrated through trade. The model yields two predictions that are tested in the second part of the paper by use of OECD data on unemployment, FDI, and labor market institutions. It will be shown that net-FDI is robustly associated with lower rates of aggregate and skill-specific unemployment. Finally, the theoretical and empirical findings also suggest that countries that exhibit a high degree of employment protection, or union density tend to have relatively more outward-FDI flows.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.socialpolitik.org/|
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.:
- James S. Costain & Michael Reiter, 2003.
"Business Cycles, Unemployment Insurance, and the Calibration of Matching Models,"
CESifo Working Paper Series
1008, CESifo Group Munich.
- 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.
- James Costain & Michael Reiter, 2005. "Business Cycles, Unemployment Insurance and the Calibration of Matching Models," Working Papers 215, Barcelona Graduate School of Economics.
- James S. Costain & Michael Reiter, 2003. "Business cycles, unemployment insurance and the calibration of matching models," Economics Working Papers 872, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2006.
- Felbermayr, Gabriel & Larch, Mario & Lechthaler, Wolfgang, 2009.
"Unemployment in an interdependent world,"
FZID Discussion Papers
06-2009, University of Hohenheim, Center for Research on Innovation and Services (FZID).
- Felbermayr, Gabriel & Larch, Mario & Lechthaler, Wolfgang, 2013. "Unemployment in an interdependent world," Munich Reprints in Economics 20597, University of Munich, Department of Economics.
- Gabriel Felbermayr & Mario Larch & Wolfgang Lechthaler, 2009. "Unemployment in an Interdependent World," Kiel Working Papers 1540, Kiel Institute for the World Economy.
- Wolfgang Lechthaler & Mario Larch & Gabriel Felbermayr, 2009. "Unemployment in an Interdependent World," 2009 Meeting Papers 596, Society for Economic Dynamics.
- Gabriel J. Felbermayr & Mario Larch & Wolfgang Lechthaler, 2009. "Unemployment in an Interdependent World," CESifo Working Paper Series 2788, CESifo Group Munich.
- Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
- 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.
- Pushan Dutt & Devashish Mitra & Priya Ranjan, 2007. "International Trade and Unemployment: Theory and Cross-National Evidence," Working Papers 070808, University of California-Irvine, Department of Economics.
- Andrea Bassanini & Romain Duval, 2009.
"Unemployment, institutions and reform complementarities: Re-assessing the aggregate evidence for OECD countries,"
- 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.
- Brecher, Richard A, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 88(1), pages 98-116, February.
- 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.
When requesting a correction, please mention this item's handle: RePEc:zbw:vfsc11:48730. 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.