FDI and unemployment, a growth perspective

Ignat Stepanok

No 201811, IAB-Discussion Paper from Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]

Abstract: "North-South foreign direct investment (FDI) is frequently viewed as a process in which jobs relocate from the North to the South. I build a growth model with two asymmetric trading economies, the North where firms innovate and the South where Northern firms invest to take advantage of lower wages. Contrary to expectation, I find that lower FDI costs increase unemployment both in the North and in the South. There are two effects of FDI on unemployment, a direct positive one which contributes to the turnover of firms parallel to innovation. The indirect effect appears through innovation and growth: more FDI means higher innovation, this intensifies firm turnover and increases the unemployment rates in both countries even further. I solve the model analytically without trade costs and imitation of products in the South. For the version with trade costs and imitation I offer a numerical solution in which I also look at the effect of FDI on welfare and find a positive relation. In addition to FDI, I explore how intellectual property (IP) rights protection affects unemployment and welfare. Both are higher in a steady state with stricter IP protection." (Author's abstract, IAB-Doku) ((en))

Keywords: Auslandsinvestitionen; Beschäftigungseffekte; Entwicklungsländer; geistiges Eigentum; Industrieländer; Nord-Süd-Beziehungen; Arbeitslosigkeit; Urheberrecht; Wirtschaftswachstum; Wohlfahrt; Arbeitsplatzverlagerung; Arbeitsplatzverlust (search for similar items in EconPapers)
JEL-codes: F12 F16 F23 F43 O31 O34 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2018
New Economics Papers: this item is included in nep-int and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in/as: Review of International Economics, 31 (2023), 2, 761-783, doi:10.1111/roie.12643

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Persistent link: https://EconPapers.repec.org/RePEc:iab:iabdpa:201811

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