Effect of Investing Abroad on Home Employment and its Secular Change: An Empirical Analysis Using the Questionnaire Survey of Small and Medium-Sized Manufacturers in Osaka (in Japanese)

Tetsuo Mo and Ryoh Ogawa

Economic Analysis, 2015, vol. 189, 46-62

Abstract: This paper examines effect of foreign direct investment (FDI) on the employment of domestically-owned firms and whether and how the effect changes over the years. We estimate two ordered probit/logit models using data collected through the questionnaire survey of small and medium-sized manufacturers whose their head offices are located in Osaka Prefecture. The results suggest that home employment increases with the increasing employment abroad but this tendency has been decreasing since the first-ever FDI for the manufacturer. This secular change persists even when we add the age of manufacturer to the set of independent variables. Next, we simulate how the average probability of selecting the “increasing home employment” increases when employment abroad expands. The “average” in this simulation means that evaluation are at sample mean of regressors. The results are as follows: while the increase in the probability is 25 % points in the case of 10 years since first-ever FDI, the increase in the probability is 4-5 % points in the case of 20 years. Moreover, we presume that the complementary relationship between home and overseas employment disappears in the case of more than 20 years. JEL Classification Number: F14 F16 F21 Key Words: Foreign direct investment; Home employment; small and medium-sized manufacturers

Date: 2015
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