The impact of horizontal and vertical FDI on labor demand for different skill groups

Arbeitspapier

This paper analyzes the determinants and effects of firm-level FDI flows on the basis of German micro-level data. Concering the determinants of FDI, I differentiate between different target regions and motivations for FDI (market seeking/horizontal FDI versus cost reducing/vertical FDI). The main result is that most firms engage in FDI because of market access. Further, I focus on the employment effects of direct investment projects abroad. From a theoretical point of view, the effects of FDI flows on labor demand at the firm level are uncertain. Therefore, this paper analyzes this question empirically using theory-based labor demand regressions and and an econometric framework based on the generalized method of moments (GMM). As a main result I find that there is no negative effect of firm-level FDI flows on employment. Positive effects seem plausible in many specification. Further, theory and anecdotal evidence suggest that unskilled workers are acted worse than highly or medium-skilled employees. Hence, the analysis distinguishes between different skill groups. Again, I cannot find negative effects of firm-level FDI flows on any skill group.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IAW Diskussionspapiere ; No. 59

Classification and Topics

• Classification: Wirtschaft ; Trade and Labor Market Interactions ; Multinational Firms; International Business ; Labor Demand
• Subject: FDI ; horizontal FDI ; vertical FDI ; labor demand ; skill groups ; GMM ; Direktinvestition ; Internationale Markteintrittsstrategie ; Arbeitsnachfrage ; Qualifikation ; Beschäftigungseffekt ; Schätzung ; Deutschland

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mattes, Anselm
• Event: Veröffentlichung
• (who): Institut für Angewandte Wirtschaftsforschung (IAW)
• (where): Tübingen
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/39222
• Last update: 10.03.2025, 11:42 AM CET