The Effect of FDI on Job Separation

60 Pages Posted: 8 Jun 2016

See all articles by Marc-Andreas Muendler

Marc-Andreas Muendler

University of California, San Diego (UCSD) - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Sascha O. Becker

Monash University - Department of Economics; University of Warwick

Date Written: 2007

Abstract

A novel linked employer-employee data set documents that expanding multinational enterprises retain more domestic jobs than competitors without foreign expansions. In contrast to prior research, a propensity score estimator allows enterprise performance to vary with foreign direct investment (FDI) and shows that the foreign expansion itself is the dominant explanatory factor for reduced worker separation rates. Bounding, concomitant variable tests, and robustness checks rule out competing hypotheses. The finding is consistent with the idea that, given global factor price differences, a prevention of enterprises from outward FDI would lead to more domestic worker separations. FDI raises domestic-worker retention more pronouncedly among highly educated workers and for expansions into distant locations.

Keywords: Multinational enterprises, international investment, demand for labor, worker layoffs, linked employer-employee data

JEL Classification: F21, F23, J63, J23

Suggested Citation

Muendler, Marc-Andreas and Becker, Sascha O., The Effect of FDI on Job Separation (2007). Bundesbank Series 1 Discussion Paper No. 2007,01, Available at SSRN: https://ssrn.com/abstract=2785276 or http://dx.doi.org/10.2139/ssrn.2785276

Marc-Andreas Muendler (Contact Author)

University of California, San Diego (UCSD) - Department of Economics ( email )

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La Jolla, CA 92093-0508
United States
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CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

Sascha O. Becker

Monash University - Department of Economics ( email )

Wellington Road
Clayton, Victoria 3
Australia

University of Warwick ( email )

Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
United Kingdom

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