Outward FDI and Parent Exports and Employment: Japan, the United States, and Sweden

24 Pages Posted: 25 May 2006 Last revised: 10 Jun 2007

See all articles by Robert E. Lipsey

Robert E. Lipsey

National Bureau of Economic Research (NBER) at New York (Deceased)

Eric D. Ramstetter

Asian Growth Research Institute; Kyushu University - Faculty of Economics

Magnus Blomstrom

Stockholm School of Economics - Department of Economics; National Bureau of Economic Research (NBER), at New York; Centre for Economic Policy Research (CEPR)

Date Written: March 2000

Abstract

Within Japanese multinational firms, parent exports from Japan to a foreign region are positively related to production in that region by affiliates of that parent, given the parent's home production in Japan and the region's size and income level. This relationship is similar to that found for Swedish and U.S. multinationals in parallel studies. A Japanese parent's worldwide exports tend to be larger, relative to its output, the larger the firm's overseas production. In this respect also, Japanese firms resembled U.S. multinationals. A Japanese parent's employment, given the level of its production, tends to be higher, the greater the production abroad by the firm's foreign affiliates. Japanese firms' behavior in this respect is similar to that of Swedish firms, but contrasts with that of U.S. firms. U.S. firms appear to reduce employment at home, relative to production, by allocating labor-intensive parts of their production to affiliates in developing countries. Swedish firms seem to allocate the more capital-intensive parts of their production to their foreign affiliates, mostly in high-wage countries. We conclude that in Japanese firms and ancillary employment at home to service foreign operations outweighs any allocation of labor-intensive production to developing countries.

Suggested Citation

Lipsey, Robert E. and Ramstetter, Eric D. and Blomstrom, Magnus, Outward FDI and Parent Exports and Employment: Japan, the United States, and Sweden (March 2000). NBER Working Paper No. w7623. Available at SSRN: https://ssrn.com/abstract=228101

Robert E. Lipsey (Contact Author)

National Bureau of Economic Research (NBER) at New York (Deceased)

Eric D. Ramstetter

Asian Growth Research Institute ( email )

11-4, Ohtemachi, Kokurakita-ku
Kitakyushu, Fukuoka 803-0814
Japan

Kyushu University - Faculty of Economics ( email )

6-19-1, Hakozaki
Higashi-ku
Fukuoka, Fukuoka 8128581
Japan

Magnus Blomstrom

Stockholm School of Economics - Department of Economics ( email )

P.O. Box 6501
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S-113 83 Stockholm
Sweden
+46 8 736 9265 (Phone)
+46 8 342 818 (Fax)

National Bureau of Economic Research (NBER), at New York

365 Fifth Avenue, 5th Floor
New York, NY 10016-4309
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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