Does Where You Go Matter? The Impact of Outward Foreign Direct Investment on Multinationals' Employment at Home

37 Pages Posted: 15 Aug 2006

See all articles by Peter Marcel Debaere

Peter Marcel Debaere

University of Virginia - Darden School of Business; Centre for Economic Policy Research (CEPR)

Hongshik Lee

Korea Institute for International Economic Policy (KIEP)

Joonhyung Lee

University of Texas at Austin - Department of Economics

Date Written: July 2006

Abstract

How does outward foreign direct investment (FDI) affect employment growth of the multinationals (MNCs) in the home country? Does the impact of outward investment differ by the level of development of the destination country of the FDI? Using a difference-in-difference approach, we assess the impact of starting to invest in less advanced countries, of investing in more advanced countries, and of changing the direction of one's investment from more to less advanced nations. To obtain suitable control groups in each case, we use the propensity score method to select national firms that ex post did not make investment decisions even though ex ante they would have been equally likely to each multinational. We find that moving to less advanced countries (as an initial foreign investment or as a redirection of previous investment) decreases a company's employment growth rate. On the other hand, moving to more advanced countries does not affect employment growth in any significant way.

Keywords: multinationals

JEL Classification: F1

Suggested Citation

Debaere, Peter Marcel and Lee, Hongshik and Lee, Joonhyung, Does Where You Go Matter? The Impact of Outward Foreign Direct Investment on Multinationals' Employment at Home (July 2006). CEPR Discussion Paper No. 5737, Available at SSRN: https://ssrn.com/abstract=924202

Peter Marcel Debaere (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

HOME PAGE: http://www.darden.virginia.edu/html/direc_detail.aspx?styleid=2&id=5794

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Hongshik Lee

Korea Institute for International Economic Policy (KIEP) ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Joonhyung Lee

University of Texas at Austin - Department of Economics ( email )

Austin, TX 78712
United States

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