The Effects of Internationalisation on Domestic Labour Demand by Skills: Firm-Level Evidence for Belgium
National Bank of Belgium Working Paper No. 206
30 Pages Posted: 17 Oct 2010
Date Written: October 1, 2010
We empirically investigate the effects of the internationalisation of Belgian firms on domestic demand for production and non-production workers, which are used as proxies for unskilled and skilled labour. Distinction is made between home-employment effects of firms’ internationalisation, through either international trade or outward foreign direct investment, in high-income countries and in low-income economies. The results of our econometric analysis, using data over 1997-2007, suggest that increasing import shares from low-income countries or investing in those countries significantly reduces demand for low-skilled labour, while it increases demand for skilled labour. An increase in exports generally raises the demand for production workers, while it reduces the demand for non-production workers. However, these effects are reversed in the case of exports to low-income countries. Considering the impact of FDI, our results tentatively suggest that the setting up of a new international investment project has a positive impact on demand for non-production workers one period before it is made. This positive effect is offset in the long run, particularly in the case of investment in low-income countries.
Keywords: labour demand, international trade, outward FDI, skilled and unskilled labour
JEL Classification: C23, F16, F21
Suggested Citation: Suggested Citation