Production and Trade in Services by U.S. Multinational Firms

61 Pages Posted: 27 Jun 2004 Last revised: 26 Aug 2010

See all articles by Irving B. Kravis

Irving B. Kravis

University of Pennsylvania - (Deceased)

Robert E. Lipsey

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

Date Written: June 1988

Abstract

Direct investment in foreign countries by U.S. goods industries represents a response to differences in labor costs to a much greater extent than the more rapidly growing investment by service industries. The latter seem to be less able to allocate different types of production to different areas of the world, probably because services are less tradable than goods; they must more often be produced where they are consumed or consumed where they are produced. Therefore, while direct Investment abroad in goods industries represents an allocation of production that Increases the demand for high-skill labor and for R & D input in the U.S. and decreases the demand for low-skill labor, direct investment in service industries, while it increases a firm's share of foreign markets, is likely to have little effect on the firm's demand for labor in the U.S. or on the composition of its labor force.

Suggested Citation

Kravis, Irving B. and Lipsey, Robert E., Production and Trade in Services by U.S. Multinational Firms (June 1988). NBER Working Paper No. w2615. Available at SSRN: https://ssrn.com/abstract=428358

Irving B. Kravis

University of Pennsylvania - (Deceased)

N/A

Robert E. Lipsey (Contact Author)

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

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