Domestic Labour Markets and Foreign Direct Investment

28 Pages Posted: 12 Sep 2003

See all articles by Jan I. Haaland

Jan I. Haaland

NHH Norwegian School of Economics - Department of Economics; Centre for Economic Policy Research (CEPR)

Ian Wooton

University of Strathclyde - Department of Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 2003

Abstract

We study how the labour market and industry uncertainty affect the investment decisions of multinational enterprises (MNEs). In an uncertain business climate, MNEs must take account of the future in deciding where to locate a branch plant. When wages are endogenously determined, both the opportunity cost of labour and redundancy payments influence the MNE's decision. When countries compete for foreign investment, different national characteristics determine the winners in different industries. Differences in risk may draw MNEs to different locations. Firm-specific bargaining always offers an advantage, as the mix of current and future pay fully reflects the firm's risk profile.

Keywords: Multinational firms, investment subsidies, entry, exit, uncertainty

JEL Classification: D92, F12, F23

Suggested Citation

Haaland, Jan I. and Wooton, Ian, Domestic Labour Markets and Foreign Direct Investment (July 2003). Available at SSRN: https://ssrn.com/abstract=443066

Jan I. Haaland (Contact Author)

NHH Norwegian School of Economics - Department of Economics ( email )

Helleveien 30
Bergen, N-5045
Norway
+4755959255 (Phone)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Ian Wooton

University of Strathclyde - Department of Economics ( email )

Sir William Duncan Building
130 Rottenrow
Glasgow G4 0GE
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
19
Abstract Views
1,410
PlumX Metrics