How Does Investing in Cheap Labour Countries Affect Performance at Home? Firm-Level Evidence from France and Italy

Posted: 29 Mar 2010

See all articles by Giorgio Barba Navaretti

Giorgio Barba Navaretti

affiliation not provided to SSRN

Davide Castellani

Henley Business School

Anne-Celia Disdier

affiliation not provided to SSRN

Abstract

Transferring low tech manufacturing jobs to cheap labour countries is often seen by part of the general public and policy makers as a step into the de-industrialization of the European economies. However, recent contributions have shown that the effects on home economies are rarely negative. Our paper contributes to this literature by examining how outward investments to developing and less developed countries (LDCs) affect home activities of French and Italian firms that turn multinational in the period analysed. The effects of these investments are also compared to the effects of investments to developed economies (DCs). The analysis is carried out by using propensity score matching. We find no evidence of a negative effect of outward investments to LDCs. In Italy they have a positive long term effect on value added and employment. For France we find a positive effect on the size of domestic output and employment.

JEL Classification: F23, D21, C14

Suggested Citation

Navaretti, Giorgio Barba and Castellani, Davide and Disdier, Anne-Celia, How Does Investing in Cheap Labour Countries Affect Performance at Home? Firm-Level Evidence from France and Italy. Oxford Economic Papers, Vol. 62, No. 2, pp. 234-260, 2010, Available at SSRN: https://ssrn.com/abstract=1578726 or http://dx.doi.org/gpp010

Giorgio Barba Navaretti

affiliation not provided to SSRN

No Address Available

Davide Castellani (Contact Author)

Henley Business School ( email )

Whiteknights
Reading, Berkshire RG6 6UD
United Kingdom

Anne-Celia Disdier

affiliation not provided to SSRN ( email )

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