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.     

Migrants and urban wage: Evidence from China's internal migration

Using China's 2005 1% population survey, this paper examines the wage impact on urban workers of rural to urban migration. We find that, on average, migrants increase the wages of urban workers, with the effect being magnified for more skilled urban workers. This suggests that migrants with skills similar to those of urban workers may complement them. We explore the possible channels of these effects. From the supply perspective, we find that migration inflows accelerate the occupational upgrading of urban workers, especially for low- and medium-skilled workers. From a demand perspective, as the share of migrants in the urban labor force increases, the number and output of industrial firms also increase, and firms become more reliant on low-skilled workers. The more migrants in a city, the greater the available employees for industrial firms, particularly for low-skilled employees. However, the effects on high-skilled firms are much smaller or insignificant. In addition, we find that migrants have little impact on firms' capital-labor and capital-output ratios. This suggests that firms can expand through capital adjustments to absorb inexpensive migrants, which alleviates the possible negative impact of migrants on the urban labor market.     

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.     

How does economic integration influence employment and wages in border regions? The case of the EU enlargement 2004 and Germany’s eastern border

This paper considers the (short-run) employment and wage effects of the 2004 EU enlargement on firms located close to Germany’s eastern border. We use a 50% sample of Germans plants and apply difference-in-differences estimators combined with a matching approach. We evaluate changes in total employment, the employment shares of low-skilled and East European workers and the wages for low-skilled, skilled and high-skilled workers in various sectors. Our results suggest basically no short-run employment effects of the EU enlargement except for firms active in wholesale and retail trade, hotels and restaurants. We also find some evidence for a stronger employment of East European workers in almost all border firms, although the effects are quantitatively small. Negative wage effects are only found for skilled workers in consulting, research and related activities.     

Economic and Social Security: The Role of the EU

This lecture addresses the issue of growing inequality of labour incomes in the EU. In this lecture, it is observed that through higher unemployment at downward rigid wages, the market position of low-skilled workers has deteriorated over the past quarter-century in Western Europe and that European countries have failed to develop an efficient instrument of income insurance on behalf of low-skilled workers. Wage subsidies are such an instrument. Furthermore, it is argued that labour market integration in an economic union like the EU entails externalities, resulting in underprovision of insurance and that coordination or matching grants could overcome this second inefficiency. On these empirical and theoretical grounds, this article proposes the organisation at EU level of a scheme of matching grants for low-skilled labour, whereby a share of national wage subsidies to low-skilled labour would be financed by the EU under suitable funding.     

Employment Effects of Offshoring across Sectors and Occupations in Japan

In the case of Japan, the studies conducted so far focus alone on firm‐level data and delve into the productivity effects and the skill upgrading between skilled and unskilled workers. Here, we carry out an empirical analysis of the employment effects of offshoring for Japanese industries on a broader classification of skills or occupations, while considering the three major sectors of the economy and taking account of both services and materials offshoring. The results suggest that various types of offshoring affect occupations differently. In particular, services offshoring tends to benefit highly skilled occupations more, while materials offshoring tends to benefit production workers instead.     

Offshoring and firm performance: self-selection,effects on performance,or both?

This paper uses unique new data for German manufacturing enterprises from matched regular surveys and a special purpose survey to investigate the causal effect of relocation of activities to a foreign country on firm performance. Compared to non-offshoring firms, firms that relocated activities were larger and more productive, and had a higher share of exports in total sales. These differences existed the year before some firms started to relocate, and this points to self-selection of “better” firms into offshoring. To investigate the causal effects of offshoring, six different variants of a matching approach are used. Contrary to what is often argued we find no evidence for a large negative causal effect of offshoring on employment in Germany.     

Offshoring and the skill structure of labour demand

In this paper we examine the link between international outsourcing—or offshoring—and the skill structure of labour demand for a sample of 40 countries over the period 1995–2009. The paper uses data from the recently compiled World Input–Output Database to estimate a system of variable factor demand equations. These data allow us to exploit both a cross-country and cross-industry dimension and split employment into three skill categories. Our results indicate that while offshoring has impacted negatively upon all skill levels within industries, the largest impacts have been observed for medium-skilled workers. Such results are consistent with recent evidence indicating that medium-skilled workers have suffered to a greater extent than other skill types in recent years.     

Labour-Market Outcomes of Older Workers in the Netherlands: Measuring Job Prospects Using the Occupational Age Structure

This paper analyses changes in job opportunities of older workers in the Netherlands in the period 1996–2010. The standard human capital model predicts that, as a result of human capital obsolescence, mobility becomes more costly when workers become older. We measure and interpret how changing job opportunities across 96 occupations affect different age and skill groups. Older workers end up in shrinking occupations, in occupations with a lower share of high-skilled workers, in occupations facing a higher threat of offshoring tasks abroad, more focus on routine-intensive tasks and less rewarding job content. This process is not only observed for the oldest group of workers, but for workers aged 40 and above. Observing older workers in declining occupations is to a large extent a market outcome, but declining job opportunities in terms of less satisfying working conditions and job tasks and content could potentially raise incentives to retire early.     

The value-added tax reform and labor market outcomes: Firm-level evidence from China

The tax incentives designed to stimulate firm investment may have a large and unexpected impact on labor market outcomes. Using a comprehensive data set on Chinese manufacturing firms during the period 1998–2007 with a difference-in-differences approach, we examine the impact of the value-added tax reform in 2004 on the firm-level labor market outcomes. We find that firms in eligible industries and pilot regions (treated firms) enjoying lower costs of purchasing fixed assets under the reform tended to increase capital investment and reduce employment simultaneously relative to firms that did not have tax incentives (the control firms). Compared with the control firms, the treated firms became more capital intensive but had declines in labor share in value added and average wage. We also find that the employment adjustment is associated with increase in the share of skilled workers in terms of engineers and technicians, but not workers with a college degree or higher.     

“凿空之旅”泽万民:“一带一路”对外直接投资如何提高劳动收入份额

文章基于2003-2016年中国上市公司数据,采用倾向得分匹配和双重差分法（PSM-DID）探讨"一带一路"沿线对外直接投资与母国劳动收入份额之间的因果关系。实证发现,企业对外直接投资长期内整体上提高了职工的工资份额。考虑企业所处地区、行业和劳动者的异质性后,结论仍然稳健。具体而言,企业通过对外直接投资的逆向技术溢出提高了创新能力、研发投入和全要素生产率,从而提高了母国职工工资份额。此外,企业的技术进步具有高技能劳动力的偏向性,母国高技能劳动者的工资份额在企业对外直接投资中得以显著提升,但对于母国低技能劳动者的工资份额影响不显著。文章研究发现"一带一路"沿线对外直接投资对母国劳动收入份额的影响机制和具体效应提供了微观证据。     

Wage Divergence and Asymmetries in Unemployment in a Model with Biased Technical Change

In an attempt to explain the different wage and unemployment responses in mainland Europe and the US to a fall in demand for low-skilled labour, we present a model with two levels of skills and two classes of goods. We analyse the response to skill-biased technical change in two distinct labour market regimes. A trade-off between wage divergence and unemployment of skilled and unskilled workers occurs. Skill-biased technical change turns out to have a different impact in both regimes, due to a different working of the chimney effect.     

How a Reduction of Standard Working Hours Affects Employment Dynamics

December 1, 1996 a new law was implemented in Portugal to gradually reduce the standard workweek from 44 to 40 h. We study how this mandatory reduction affected employment through job creation and job destruction. There was considerable regional, sectoral and firm-size variation in the share of workers who were affected by the working hours reduction. We exploit this variation to assess the impact of the workweek reduction. We find evidence that the working hours reduction had a positive effect on employment through a fall in job destruction.     

Offshoring and working hours adjustments in a within-firm labor market

Although a growing body of literature identifies the within-firm redistribution effects of trade, research on the adjustment processes in within-firm labor markets remains scarce. This study analyzes the within-firm adjustment of working hours and wages by considering workers’ educational background and gender in response to a change in offshoring. Matched worker–firm panel data in the Japanese manufacturing sector covering 1998 to 2014 are used. The analysis leads to the following three observations. First, offshoring does not significantly alter the skill premium and gender gap in terms of scheduled monthly salaries and scheduled hourly wages. Second, offshoring decreases skill premium in annual hourly wages, whereas it increases gender gap in annual salaries. Third, this uneven impact on annual variables arises from the different changes in overtime working hours: college graduates work longer with a lower overtime premium, whereas female workers do not increase overtime work.     

Product market competition, unemployment and income disparities

Product Market Competition, Unemployment and Income Disparities. — We discuss how promoting competition in product markets affects unemployment and wage differentials. We examine a general equilibrium model with real wage rigidities in labor markets and market power in product markets. We illustrate how more intense competition reduces unemployment. A decrease of markups would induce an increase of real wages if real wages were flexible. This enables the employment of more low-skilled people above a real reservation wage. More intensive competition, however, widens wage and income differences between low-skilled and high-skilled workers. Differences of income distributions across countries could also be caused by differences in the intensity of product market competition.     

A Picture of Wage Inequality and the Allocation of Labor Through a Period of Trade Liberalization: The Case of Brazil

This paper constructs a picture of the labor market impact of trade liberalization in Brazil. We examine the level and dispersion of wages, the skilled wage premium, and employment composition before and after trade liberalization. After trade reform, there was a rise in the returns to college education which, since the share of college workers also rose, is attributable to rising demand. This change did not increase overall wage dispersion because of the small share of college-educated workers and because of decreasing returns to intermediate levels of education.     

Offshoring,wages, and heterogeneity

Considering heterogeneous responses by skill group to material and service offshoring, we examine the relationship between offshoring and the individual wages of workers in the U.S. labor market. We find that offshoring has been beneficial for high-skill workers but detrimental for middle- and low-skill workers. In particular, service offshoring, which has been widespread since 2000, has severely affected the labor market, compared to material offshoring.     

Job security and work force adjustment: How different are U.S. and Japanese practices?

The paper compares employment and hours adjustment in Japanese and U.S. manufacturing. In contrast to some previous work, we find that adjustment of total labor input to demand changes is significantly greater in the United States than in Japan; adjustment of employment is significantly greater in the United States, while that of average hours is about the same in the two countries. Although workers in Japan enjoy greater employment stability than do U.S. workers, we find considerable variability in the adjustment patterns across groups within each country. In the United States, most of the adjustment is borne by production workers. In Japan, female workers, in particular, bear a disproportionate share of adjustment.     

Task specialization and low-skilled immigration in a highly educated country: Evidence from Korea

While imperfect substitutability between native and immigrant workers is an important mechanism in estimating the wage effects of immigration, its empirical literature is concentrated on the context of only a few countries. Using occupation task-intensity data from a unique Korean data set, we demonstrate that relatively skilled native Korean workers respond to increased low-skilled immigration by pursuing jobs more intensive in communication and cognitive tasks. This native response is mainly pronounced in knowledge-intensive service sectors and leads to an improvement in average wages in these sectors. Our results support the general assumption that the labor market impact of immigration critically depends on whether native and immigrant workers are substitutes or complements in production.     

Exploring the Macroeconomic Impact of Subsidized Employment

Spending on subsidized employment programmes has taken a high flight in the Netherlands over the past decade. We consider the impact of subsidized employment for low-productive workers in a stripped-down version of the MIMIC model. In our stylized model employment subsidies in the private sector lead to a marginal increase in employment and output. Subsidized employment programmes in the public sector lead to a larger increase in overall employment, but crowding out of regular employment leads to a fall in overall output. We further show that judging programmes on the basis of individual effects can be quite misleading, as the effects on the aggregate level can be quite different. Finally, given the steep rise in expenditures it is disturbing to see how little empirical knowledge we have on the impact of actual programmes on the individual level.