Job Opportunities in Foreign Firms and Internal Migration in Vietnam

Using the 2004 Vietnam Migration Survey and the 2004 Vietnam Household Living Standards Survey, this paper investigates the role of employment opportunities created by foreign‐owned firms as a determinant of internal migration and destination choice. Multinomial logit and conditional logit models are estimated to study both origin‐and destination‐specific characteristics of migrants. The paper finds that the migration response to foreign job opportunities is larger for female workers than male workers; there appears to be intermediate selection in terms of educational attainment; and migrating individuals tend to go to destinations with higher foreign employment opportunities, even when controlling for income differentials, land differentials and distances between sending and receiving areas.     

Multinational firms, market integration, and trade structure: What remains of the standard-goods hypothesis?

Multinational Firms, Market Integration, and Trade Structure: What Remains of the Standard-Goods Hypothesis? — In extending traditional empirical trade models to multinational firms, this paper shows the effect of the transfer of firm-specific technology and intangible assets by these firms on the structure of host countries. For Belgium, a small open economy with a large presence of foreign multinationals, this effect is of crucial importance and previous studies appeared to have produced biased results by neglecting it. The econometric results show how the large multinational presence induced by the European integration has shifted Belgium’s trade structure towards differentiated products, thereby challenging the standard-goods hypothesis which states that small countries tend to specialize in nondifferentiated products. Spain and Ireland have witnessed an increase in foreign direct investment and a shift in trade structure similar to Belgium after joining the EC.     

R＆D Activities of Manufacturing Multinationals in China： Structure,Motivations and Regional Differences

This paper investigates the R＆D motivations of various multinationals operating in China, drawing on a large-scale, firm-level dataset of official Chinese statistics on science and technology activities. The present study shows that R＆D efforts in China have intensified for bothJbreign-owned and domestic firms, but less so for foreign-owned firms, perhaps because foreign-owned firms tend to operate on a foundation of technological capabilities developed within their home countries. Statistical analysis confirms that the major motivations for foreign R＆D in China are production-driven, not market-driven or technology-driven. Nevertheless, one sees significant variations in foreign R＆D strategies from region to region. Guangdong is characterized by production-driven R＆D. In Beijing, R＆D strategies tend to take a technology-driven approach, drawing on the clusters of scienl（fic institutions. In Shanghai, the R＆D efforts of multinationals tend to focus on support for market-driven R＆D,     

Wage differentials between local and foreign workers in Macao: Discrimination?

This paper looks into the wage differential between local and foreign workers in Macao. We applied standard wage decomposition techniques to official wage statistics to identify wage gaps according to sector and occupation, among other dimensions. The results suggest that, in addition to wage discrimination against foreign workers as a whole, Macao’s employers tend to pay skilled foreign workers premium wages, whereas less-skilled foreign workers receive lower wages than their local counterparts.     

Openness, Technological Change and Labour Demand in Pre-Crisis Indonesia

This paper examines the impact of export orientation, import competition, foreign ownership and the rate of capital accumulation on the relative demand for skilled and unskilled labour in pre-crisis Indonesia. Estimates from an interrelated factor demand analysis indicate that openness and foreign ownership, by themselves, acted to raise the relative demand for unskilled workers in the pre-crisis period, while the newness of capital was associated with increased relative demand for skilled workers. Overall, the relative demand for unskilled workers increased yet their relative wage position weakened. These contrasting relative employment and wage changes are consistent with the examined demand shocks and the greater elasticity of supply of Indonesian unskilled relative to skilled labour.     

Non-standard Employment in Sweden

In Sweden, as in many other countries, marginal groups tend to be overrepresented in non-standard employment. A decomposition of the employment rate of full-time workers on permanent contracts reveals that non-standard employment contributes to a substantially weaker labour market attachment for females and the foreign born than suggested by conventional employment figures alone. Our econometric analysis shows that the negative wage premia associated with fixed-term employment are considerably smaller in Sweden, both for natives and foreign born, than those that have been found for other countries. This may be due to a highly compressed wage structure and extensive coverage of collective bargaining in Sweden. On the whole, the type of fixed-term contract seems not to matter for the estimated wage premia.     

Are Investment Promotion Agencies Effective in Promoting Outward Foreign Direct Investment? The Cases of Japan and Korea

In this paper we examine the role of investment promotion agencies (IPA) in promoting outward foreign direct investment (FDI) from Japan and Korea. Looking at two home countries enables us to control for both country‐pair time‐invariant characteristics and host‐country time‐varying characteristics. Our empirical results suggest that home‐country IPA tend to be more effective in promoting outward FDI in politically risky host countries. However, this finding depends on whether the home‐country firm is listed or unlisted. More specifically, we find that the positive effect of home‐country IPA on outward FDI in politically risky countries is limited to unlisted home‐country firms, which tend to be less productive.     

Legal Traditions and Foreign Ownership Modes: Evidence from China

Using census data gathered in 2001, the present paper examines how legal traditions influence foreign investors’ choice of ownership modes in China. The study finds that, first, investors from economies sharing the same legal origin with China tend to select ownership modes with a relatively high level of foreign control. That is, such foreign direct investment (FDI) firms are more likely to be wholly owned enterprises or joint ventures with relatively large foreign shares. Second, similarities in legal enforcement between China and the home economies correlate positively with high foreign control. Third, the effects of legal traditions on ownership modes are relatively weak for new entrants compared to their forerunners, probably owing to the continuous improvement in China's business and law institutions.     

Global value chains and servicification of manufacturing: Evidence from firm-level data

Recent literature on global value chains (GVCs) has mainly focused on manufacturing firms’ global sourcing and investment strategies. Our question here is that, if the manufacturing firms established foreign manufacturing plants and engaged in sourcing inputs and exporting outputs, have they changed their domestic employment composition toward service workers? This is what we call servicification of manufacturing firms in this paper. To answer this question, using Korean firm-establishments matched data, we examine changes in the shares of service employment in manufacturing firms from 2008 to 2013, when those firms are participating in both import-and-export and foreign direct investment (i.e., GVC firms). We find that the two-way trading firms that own manufacturing plants in foreign countries—and particularly in nearby foreign countries—have changed their domestic employment structures to increase the number of service workers they employ. Moreover, the relatively greater increase in the share of R&D workers than of wholesale-and-retail workers serves as further evidence of the servicification of domestic manufacturing. Overall, our findings suggest that Korean firms who engage in GVCs through both trade and foreign direct investment have reorganized domestic labor structure to be able to provide high value-added headquarter services for their manufacturing plants that are closely located in foreign countries.     

Foreign direct investment and factor prices in U.S. manufacturing

Foreign Direct Investment and Factor Prices in U.S. Manufacturing. —We investigate whether inward foreign direct investment (FDI) can explain part of the increase in relative wages of skilled workers in U.S. manufacturing over the period 1977–1994 by studying the sector bias of the effects of FDI on sector prices and technology. We follow the two-stage mandated-wage approach based on the StolperSamuelson theorem. We find that inward FDI affects the sum of sector prices and productivity depending on the absorptive capacity available in the sector. We also find some evidence that inward FDI has induced a sector bias towards using skilled workers over the period 1977–1994.     

Why Do Foreign-Owned Firms Pay More? The Role of On-the-Job Training

While foreign-owned firms have consistently been found to pay higher wages than domestic firms to what appear to be equally productive workers, the causes of this remain unresolved. In a two-period bargaining framework we show that if training is more productive and specific in foreign firms, foreign firm workers will have a steeper wage profile and thus acquire a premium over time. Using a rich employer-employee matched data set we verify that the foreign wage premium is only acquired by workers over time spent in the firm and only by those that receive on-the-job training, thus providing empirical support for a firm-specific human capital acquisition explanation. JEL no. F23, J24     

Multinationals, production efficiency, and spillover effects: The case of the U.S. auto parts industry

Multinationals, Production Efficiency, and Spillover Effects: The Case of the U.S. Auto Parts Industry. — Since the mid-1980s many of the developing countries have attempted to attract foreign direct investment. The primary reason is access to modern technology although the true impact is still controversial. The U.S. case suggests that even in a developed country FDI can also make a favorable impact on the local industry, but possibly through different channels. FDI can increase efficiency substantially through the enhancement of competitive pressure instead of, or in addition to, technology transfer. The manner in which FDI influences the local economy seems to be very different depending on the development stage of recipient countries.     

On Taxation,Political Accountability and Foreign Aid: Empirics to a Celebrated Literature

The Eubank findings on taxation, political accountability and foreign aid have had an important influence on academic and policymaking debates. Eubank has warned that his findings should not be generalised across Africa until they are backed by robust empirical evidence. This paper puts some empirical structure to the celebrated literature. The empirical evidence which is based on data from 53 African countries for the period 1996‐2010 broadly confirms the Somaliland‐based Eubank hypothesis that in the absence of foreign aid, the dependence of government on local tax revenues provides the leverage for better political governance.     

Host country competition,labor skills,and technology transfer by multinationals

Host Country Competition, Labor Skills, and Technology Transfer by Multinationals. — This paper examines the impact of local competition and the availability of skilled labor on the technology imports of foreign MNC affiliates in Mexican manufacturing industries. The authors find that proxies for local competition and labor skills are positively related to the recorded technology imports of foreign owned affiliates. The effects of competition appear to be particularly strong in intermediate and consumer goods industries, while the availability of skilled labor seems to be particularly important in durable and capital goods industries. Thus, government policies aiming to create a competitive climate and improve labor quality may also promote inflows of modern technology.     

Interaction between Foreign and Domestic Investors in the Korean Stock and Futures Markets*

The present paper analyzes the behavioral relations of major investor groups in the stabilized Korean stock and futures markets after the 1997 Asian financial crisis. Investor groups cannot be classified as positive or negative feedback traders on market returns when both stock and futures markets are considered, which is inconsistent with the results in Ghysels and Seon (2005). Foreign investors and domestic institutions tend to take opposite positions in both markets. The impact of foreign investors on the basis change is significantly negative in the futures market, whereas domestic institutions have a negative relation in the stock market. This supports the view that selling activity of foreign investors in the futures market pulls the futures price down compared with the index value and, consequently, induces the reverse cash‐and‐carry trade of domestic institutions. This relationship, which negatively influenced the Korean economy during the crisis, as shown in Ghysels and Seon (2005), still exists in the Korean financial markets.     

Multinationals, skills, and wage elasticities

The increase in foreign direct investments raises concerns about labor market consequences in many countries. It is feared that multinational firms are inclined to shift jobs abroad and increase job volatility. We use firm-level data to examine if multinationality and foreign ownership affect the wage elasticity of labor demand. Unlike previous studies, we distinguish the effect on different skill groups of employees. We find no general difference in wage elasticity between foreign and domestic firms but the wage elasticity is higher in multinational firms than in national firms, in particular for medium-skilled workers.     

Foreign entry and domestic welfare

Foreign Entry and Domestic Welfare. — This paper discusses the consequences for domestic welfare of entry by foreign firms into a domestic market. A simple Bertrand model with differentiated products and a Cournot model with homogeneous goods are investigated and it is shown that welfare is non-monotonic in foreign entry in both cases. A “little” entry is harmful but a “lot” is beneficial. It is shown that this depends on the number of domestic firms in the industry.     

Capital mobility and EU enlargement

Capital Mobility and EU Enlargement. — The membership of the Eastern European transition economies in the EU would require inter alia the full liberalization of their capital flows. Using the correlation between domestic saving and investment, this paper provides empirical evidence of the openness with respect to foreign capital that the accession states have attained so far. A comparison with the southern members of the EU shows that the countries under review have reached a similar degree of integration in quantitative terms. Yet, further adjustment in qualitative terms, i.e., in the structure of capital flows, can be expected as the process of accession proceeds.     

Specialization, outsourcing and wages

This paper studies the impact of outsourcing on individual wages. In contrast to the standard approach in the literature, we focus on domestic outsourcing as well as foreign outsourcing. We argue that if outsourcing is associated with specialization gains arising from an increase in the division of labor, domestic outsourcing tends to increase wages for both unskilled and skilled labor. We use a panel data set of workers in Danish manufacturing industries to show that domestic and foreign outsourcing affect wages as predicted.      

Japanese foreign direct investment and regional trade

We examine the relationship between Japanese FDI outflows, domestic and foreign fixed investment, and the exchange rate. The results indicate that aggregate FDI outflows have been driven by investment in Japan and the exchange rate, while the geographic distribution of such investment has been influenced by foreign economic conditions. We also find that FDI outflows have a temporary impact on exports but a permanent effect on imports. We find no evidence that behavior with respect to East Asia differs from that with respect to North America or Europe.