Investment abroad and labour adjustment at home: evidence from UK multinational firms

Helen Simpson

Canadian Journal of Economics, 2012, vol. 45, issue 2, 698-731

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

Date: 2012
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