Investment abroad and labour adjustment at home: evidence from UK multinational firms
In: The Canadian journal of economics: the journal of the Canadian Economics Association = Revue canadienne d'économique, Band 45, Heft 2, S. 698-731
ISSN: 1540-5982
Abstract. This paper provides new evidence on the effects of overseas FDI on the skill‐mix of multinational firms' home‐country operations. The analysis exploits China's WTO accession to identify the impact of outward investment into a low‐wage economy and uses plant‐level data to investigate changes in industrial structure within firms driven by plant closures. As predicted by models of vertical FDI, the paper demonstrates that overseas investment in low‐wage economies is associated with asymmetric effects on workers in low‐ and high‐skill industries in the home economy and, in particular, with firms closing down plants in low‐skill industries. JEL classification: F2