Occupational Composition Within Multinational Firms: Evidence From Korean Employer-Employee Matched Data

Using Korean employer-employee matched data, we investigate the difference in occupational structure between domestic and multinational firms in manufacturing sectors. The main result shows that the occupational composition of the multinational firms is more skewed toward high-skills and service occupations than domestic firms. Furthermore, we find the heterogeneous labour structure among multinational firms upon types and locations of foreign affiliates. The multinationals that are establishing production plants or locating their affiliates in emerging countries tend to be composed of relatively smaller share of high-skills and service occupations than those with foreign R&D centres or business branch or with affiliates located in advanced countries.     

Import competition from and offshoring to low-income countries: Implications for employment and wages at U.S. domestic manufacturers

Using confidential linked firm-level trade transactions and census data between 1997 and 2012, we provide new evidence on how American firms without foreign affiliates adjust employment and wages as they adapt to import competition from low-income countries. We provide stylized facts on the input sourcing strategies of these domestic firms, contrasting them with multinationals operating in the same industry. We then investigate how changes in firm input purchases from low-income countries as well as domestic market import penetration from these sources are correlated with changes in employment and wages at surviving domestic firms. Greater offshoring by domestic firms from low-income countries correlates with larger declines in manufacturing employment and in the average production workers’ wage. Given the negative association, however, the estimated magnitudes are small, even for a narrow measure of offshoring that includes only intermediate goods. Import penetration of U.S. markets from these sources is associated with relatively larger changes in employment for arm’s length importing firms, but has no significant correlation with employment changes at firms that do not trade. Given differences in the degree of both offshoring and import penetration, we find substantial variation across industries in the magnitude of changes associated with low-income country imports.     

The impact of foreign direct investment in China on employment adjustments in Taiwan: Evidence from matched employer–employee data

Using a unique matched employer–employee dataset on Taiwanese manufacturing, we examine the impact of foreign direct investment in China on domestic employment adjustments controlling for firm and worker heterogeneity as well as for potential endogeneity of firms’ expansion in China. Our findings suggest that workers employed at firms with higher levels of investment in China are more likely to leave the firm, compared with workers at firms with zero or lower levels of investment in China. We provide evidence that foreign expansion in China decreases worker employment security at parent companies, particularly for low-skilled workers. Employment adjustments through employer-to-employer transitions are found to be highly associated with wage losses, with the strongest wage effects for low-skilled workers who shift employment between industries. Moreover, we find no evidence that FDI in China contributes to skill upgrading at parent companies.     

Outward Foreign Direct Investment and Domestic Performance: the Italian Manufacturing and Services Sectors

How does outward foreign direct investment (FDI) affect employment and productivity growth in the home country? Does the impact of outward investment differ among manufacturing and service sectors? In this paper we analyze the effects of investing abroad using firm-level data for Italy for the period 2003–2006. We adopt matching techniques in combination with a difference-in-difference estimator in order to investigate the causal effect of becoming multinational on domestic employment and productivity. Preliminary results suggest that Italian outward FDI has limited effects on domestic employment and performance of internationalizing firms on average. However, results significantly differ depending on the sector (manufacturing versus services) where the MNEs are operating. In particular, we find that while in the manufacturing sector, outward FDI tends to strengthen both productivity and, to less extent, employment. In the service sector, we find a negative effect on employment (two years after the investment).     

Does global value chain participation improve firm productivity? A study of selected ASEAN developing countries

This paper examines the impact of local firms’ participation in global value chains (GVCs) on productivity by considering three different patterns of GVC participation. We conducted a DID-PSM estimation involving three countries, Indonesia, the Philippines, and Vietnam, and 17 manufacturing sectors in 2009 and 2015 in a panel framework. We found an endogenous relationship between firm productivity and GVC participation: firms that enter GVCs have high productivity before participating in the GVCs (selection effect), and only Indonesian firms that entered GVCs had high productivity growth after joining GVCs (learning effect). These two effects were only found for firms that both import intermediate goods and export output and not for firms that only either import or export. We also found that indirect exporting does not improve a local firm's productivity. Several recommendations are made to help firms and governments facilitate the participation of firms in GVCs.     

The effect of foreign competition on UK employment and wages: Evidence from firm-level panel data

The Effect of Foreign Competition on UK Employment and Wages: Evidence from Firm-Level Panel Data. —This paper contributes to the sparse empirical literature on the effects of foreign competition on domestic employment and wages. The authors estimate a structural labour demand equation on UK firm-level panel data between 1982 and 1989 and several wage equations. When they restrict the sample to the manufacturing sector only, they find for the unionized firms that foreign competition has a negative effect on both wages and on employment. However, when UK manufacturing firms face only a few rivals, foreign competition has a positive effect on wages, but no effect on employment.     

Affiliates and parent employment through foreign direct investment: a study case of substitutability or complementarity

How does outward foreign direct investment (FDI) affect employment of multinationals in the home country? Does the impact of outward investment differ among manufacturing and service sectors? Using data on Italian MNEs, this paper examines the impact of Italian outward FDI on local employment between 1998 and 2006. In particular, we investigate the relationship existing between employment in the parent company and employment in foreign affiliates by distinguishing according to host-country location and sector of activity. The results suggest that the effects of Italian outward FDI on domestic employment differ according to the sector and the country of destination. In the manufacturing sector, a weak but significant relationship of labour substitutability is found for Italian MNEs producing low-technology products in foreign affiliates localized in high-wage countries. On the other hand, a significant North–south complementarity relationship in labour demands appears in the High and Medium-high- technology sectors. In the service sector, we find strong complementarity between employment in the parent firm and employment in foreign affiliates: in particular, this regards Italian MNEs producing knowledge-intensive services both in Western affiliates and CEEC locations. These results are robust when we control for endogeneity of output and parent wages.     

How does intermediate consumption affect GVC positions? - A comparison between China and US

Using the data of the World Input and Output Table (WIOD) from 2000 to 2014, this paper measures the positions of China and the US in the global value chains (GVCs). We develop a new dual structural decomposition method to analyze the drivers behind the GVC position differences between the two countries from the perspective of intermediate consumption. The results show that (1) China is moving away from both end-users and primary factors, while the U.S. is moving towards both ends of the GVCs. The gap between China and the US in GVCs is widening. (2) About 40% of the difference between the GVC positions of China and the US can be attributed to the difference in industrial structures between the two countries, and the remaining 60% is related to the difference in the GVC positions of the same industries between the two countries. (3) China's three major industries are all embedded in a further GVC position from households, governments, and investors (HGIs) than the US, but they are formed for completely different reasons. The domestic direct effect is the main reason for the resource industry, the multiplier effect is the main driver for the manufacturing industry, and the domestic linkage effect is the main factor for the service industry. (4) The different roles of the two countries in the international division of labor result in the difference in the two countries' consumption coefficients of the manufacturing and service sectors, and the asymmetric interaction between industries ultimately leads to the differentiation in the GVC positions of the industries between the two countries.     

Foreign direct investment and technology spillovers: Which firms really benefit?

Foreign direct investment is thought to contribute to host economies by increasing their efficiency either directly or through technology diffusion. Such efficiency benefits are neither equally produced by foreign firms nor equally distributed to all domestic firms. The special question addressed in this study is related to how differentiated such effects are depending on size and degree of (foreign) ownership. Based on a sample of 3,742 manufacturing firms operating in Greece in 1997, it is found that, while it is large, majority-held foreign firms that exhibit higher productivity, spillovers are important for small domestic firms and stem mostly from small joint ventures where the foreign partner owns a minor part of equity. JEL no. F23, O30     

FDI如何影响本地企业出口——来自中国制造业的发现

文章从理论上分析了外资进入影响本地企业出口行为的机制，并在构造外资溢出三类指标的基础上，运用1998-2007年中国制造业企业数据实证检验了外资溢出对本地企业出口参与决策和出口规模的影响。研究表明：（1）外资企业通过行业内水平溢出和行业间前向关联溢出显著促进了本地企业的出口参与决策，并提高了本地企业的出口规模；（2）外资行业间后向关联溢出对本地企业出口参与决策的影响不明显，但扩大了已出口企业的出口规模，控制内生性后结论仍成立；（3）外资进入对本地企业出口行为的影响因外资来源地和本地企业所有制性质的不同而存在显著的差异性。     

Should I stay or should I go? Foreign direct investment,employment protection and domestic anchorage

This paper examines theoretically and empirically how employment protection legislation affects location decisions of multinationals. We depart from the “conventional wisdom” by examining not only the effect of protection on inward foreign direct investment (FDI), but also a country’s ability to “anchor” potential outward investment. Based on our simple theoretical framework, we estimate an empirical model, using data on bilateral FDI and employment protection indices for OECD countries, and controlling for other labour market institutions and investment costs. We find that, while an “unfavourable” employment protection differential between a domestic and a foreign location is inimical to FDI, a high domestic level of employment protection tends to discourage outward FDI. The results are in line with our conjecture that strict employment protection in the firm’s home country makes firms reluctant to relocate abroad and keeps them “anchored” at home.     

Testing for horizontal and vertical foreign investment spillovers in China, 1998–2007

As with many developing countries, the Chinese government hopes that knowledge brought by multinationals will spill over to domestic industries and increase their productivity. In this paper, we show that foreign investment originating outside of Hong Kong, Macau, and Taiwan has positive effects on individual firm level productivity, while foreign investment from HKMT firms does not. We also test for both horizontal (within the same industry) and vertical (upstream or downstream) linkages from foreign investment. Using a manufacturing firm-level panel for 1998 through 2007, we find zero or weak positive horizontal externalities. However, our results show that foreign direct investment (FDI) has generated positive productivity spillovers to domestic firms via backward linkages (the contacts between foreign affiliates and their local suppliers in downstream sectors) as well as forward linkages (between foreign suppliers and their local buyers in the upstream sectors).     

Impact of Outward Foreign Direct Investment on Chinese Manufacturing Firms' Financialization and Servitization

This study examines the impact of outward foreign direct investment (OFDI) on Chinese manufacturing firms' financialization and servitization. Using a difference-in-differences approach with propensity score matching, we found that OFDI encouraged firms' financial and service activities. The effects of OFDI on financialization were stronger for firms specializing in short-term financial assets, operating in labor and technology-intensive sectors, investing overseas to pursue production, resources and markets there, and investing in non-OECD and Belt and Road Initiative (BRI) countries. Meanwhile, firms investing overseas were more likely to provide services at the sale or postsale stages. Outward foreign direct investment has also boosted the service activities of firms operating in the technology-intensive sector by investing overseas to seek resources and markets, as well as investing in non-OECD and BRI countries. Finally, OFDI partially influenced the extent of financialization and servitization of firms by affecting their profit-making ability.     

Tax policy on foreign direct investment in the presence of cross-hauling

Tax Policy on Foreign Direct Investment in the Presence of Cross-Hauling. — The authors develop a partial equilibrium model of foreign direct investment (FDI) in which identical foreign firms locate themselves in a host country to compete with internationally mobile domestic firms in non-tradeable oligopolistic markets for two differentiated commodities. The host country, which is small in the market for FDI, uses lumpsum subsidy (tax) to encourage (discourage) FDI. There is unemployment in the host country. Under this framework, the authors analyse the effect of discriminatory and uniform subsidies on the inflow/outflow of domestic and foreign firms and on employment. They also derive some properties of optimal subsidies.     

Foreign Investment,Divestment and Relocation by Japanese Electronics Firms in East Asia*

Although foreign divestment and international relocation by multinational firms carry important economic implications for the industrialization of East Asian countries, there has been little empirical research on these issues. In this paper we analyze the magnitude and pattern of foreign divestment and relocation by Japanese electronics firms in nine East Asian countries during 1995–2003. The average annual divestment rate of electronics manufacturing affiliates is 3 percent, but divestment patterns diverge strongly across countries. Divestments are much more frequent in higher labor cost countries and in approximately one‐third of cases are accompanied by relocations to lower wage countries, particularly to China. Evidence is found for rivalry between China and ASEAN countries in attracting foreign direct investment, but the growing attractiveness of China has not been accompanied by a reduction in employment in Japanese affiliates in ASEAN countries (with the exception of Singapore). Divestments and relocations are related to Japanese firms’ strategy to reconfigure their Asian production networks in response to changing competitiveness, regional integration, and changes in local investment environments.     

Servicification of investment and structural transformation: The case of China

Structural transformation is a key feature of economic development. Traditional literature attributes it to changes in the sectoral composition of consumption. Different from it, we argue that “servicification” of investment goods, induced by investment-composition technological change, becomes an increasingly important reason for structural transformation, particularly for the rise of the services economy. Our study of the input output tables finds that the share of service inputs in investment goods has grown significantly in many countries since the 1980s, especially for investment-intensive economies such as China. To assess if the investment channel is quantitatively significant, we build a standard model with three broad sectors, but instead add an investment production function employing factors from all three sectors. Moreover, we incorporate investment-composition technological change by allowing the productivities of the three sectoral inputs to evolve over time. We calibrate the model to the Chinese economy from 1981 to 2014 and perform counter-factual experiments accordingly. We find that investment-composition technological change accounts for 33.1% decline in employment share of agriculture, 36.0% increase in employment share of manufacturing and 31.5% increase in employment share of services over the period. The magnitude of this effect on the share of services keeps growing, particularly after 2000. Our findings are not unique for China, but also apply to other economies experiencing the “servicification” of investment.     

The effects at home of initiating production abroad: evidence from matched French firms

Based on matching techniques in combination with a difference-in-difference estimator, this paper estimates the effects at home of initiating production abroad through the establishment of a foreign production affiliate. The analysis covers manufacturing and service firms active in France during the period 1987–1999. We show that the motivation to start producing abroad is an important determinant of its impact at home. Market-seeking foreign direct investment (FDI) in manufacturing is associated with significant scale effects, resulting in job creation. By contrast, factor-seeking FDI in manufacturing has no significant effect on employment. However, there is some evidence that this type of FDI is associated with technology effects, in the form of greater capital-intensity and efficiency, as well as larger exports. Finally, FDI in service sectors is associated with significant positive employment effects, presumably reflecting the importance of the market-seeking motive in these sectors.     

Global value chains participation and productivity gains for North African firms

The emergence of global value chains (GVCs) has provided some firms the opportunity to internationalize by specializing in the production of specific inputs or tasks along the chain, with a direct impact on a country’s competitiveness. China, for instance, managed to enter low value added phases in GVCs to rapidly become a major player in world trade. Against this background, this paper asks whether North Africa, given its favourable geographic position in the Mediterranean and proximity to Europe, can grab similar opportunities. In particular, it analyzes the GVCs participation of North African firms and its implications for productivity. Since the coordination of vertically fragmented production processes increasingly relies on an adequate level of quality and reliability, especially when the inputs from several stages and locations must come together in a specific way, we identify firms involved in GVCs as traders with internationally recognized quality certification. Using a propensity score matching diff-in-diff method, the paper finds that firms that enter GVCs both perform better ex ante and show additional productivity gains ex post. Results suggest that policies designed to support certifications and compliance with international standards and to increase trust between firms in different countries, represent an important tool for linking developing countries to global production networks, with possible positive consequences on their economic development and growth.     

Knowledge spillovers from foreign direct investment in R&D: Evidence from Japanese firm-level data

This study uses firm-level panel data from the Japanese manufacturing industries and examines whether foreign direct investment generates intra-industry knowledge spillovers to domestic firms. The analysis found positive effects of R&D stocks of foreign firms on the productivity of domestic firms, while effects of capital stocks of foreign firms were absent, suggesting that knowledge of foreign firms spills over through their R&D activities, but not through their production activities. In addition, we found that the extent of spillovers from R&D stock of foreign firms is substantially larger than spillovers from R&D stock of domestic firms.     

澜湄流域制造业生产阶段数测算及其影响因素研究

在全球投入产出模型框架下,测算澜湄流域制造业生产阶段数,并对影响澜湄流域制造业生产分割程度的因素进行实证分析。结论为:澜湄流域制造业生产阶段数整体上呈上升趋势,生产结构复杂度明显增加,国际和国内外包呈互补关系;经济规模、研发强度及劳动力水平对澜湄流域制造业生产分割长度具有显著促进作用,资本化率、服务业增加值比重、FDI流入及私营部门的国内信贷量占GDP的比重,对澜湄流域制造业生产分割长度具有负面影响。因此,澜湄流域国家应积极改变参与全球分工的方式,提高金融市场开放程度,吸引外资的同时注重外资质量,并加大教育经费投入,增加研发创新和人才培养,提高劳动力水平,加快发展交通运输业和信息技术服务业。