It matters where you go. Outward foreign direct investment and multinational employment growth at home

Peter Debaere, Hongshik Lee, Joonhyung Lee

Research output: Contribution to journalArticle

38 Citations (Scopus)

Abstract

How does outward foreign direct investment (FDI) affect employment growth of the multinational corporations (MNCs) in the home country? Does the impact of outward investment differ by the level of development of the destination country of the FDI? Using a difference-in-difference approach, we assess the impact of starting to invest in less-advanced countries compared with investing in more-advanced countries. To obtain suitable control groups in each case, we use the propensity score method to select national firms that ex post did not take the investment decisions that we study even though ex ante they would have been equally likely to. We find that moving to less-advanced countries decreases a company's employment growth rate especially in the short run. On the other hand, moving to more-advanced countries does not consistently affect employment growth in any significant way. Including investment decisions of established multinationals in the estimation somewhat weakens but does not overturn this conclusion.

Original languageEnglish
Pages (from-to)301-309
Number of pages9
JournalJournal of Development Economics
Volume91
Issue number2
DOIs
Publication statusPublished - 2010 Mar 1

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Keywords

  • Foreign direct investment
  • Labor demand
  • Location choice
  • Multinationals

ASJC Scopus subject areas

  • Economics and Econometrics
  • Development

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