The decision to invest in a low-wage country: Evidence from Italian textiles and clothing multinationals

Giorgio Barba Navaretti (), Anna Falzoni and Alessandro Turrini

The Journal of International Trade & Economic Development, 2001, vol. 10, issue 4, 451-470

Abstract: In this paper we investigate the firm-specific factors that account for the decision to invest in low-wage countries on the part of Italian firms in the textiles and clothing sector. This analysis is motivated by the fact that our survey data show, between 1990 and 1997, a decline of average employment in parent companies, while that in subsidiaries grew substantially. However, correlation and regression analysis show that employment in parent companies that invested in low-wage countries only seems to be negatively related with employment abroad. Our hypothesis is that investments in cheap labour countries are mainly cost-driven and are undertaken by firms that focus on a low-quality, low-cost strategy. We test this hypothesis through a probit analysis. The evidence suggests that investments to cheap labour countries are more likely to be of a vertical type, being relatively more labour-intensive compared with the parent company. Our hypothesis seems to be confirmed empirically. Investments in low-wage countries are more likely to generate abundant intra-firm trade and to be undertaken by firms with low shares of skilled employment.

Keywords: Foreign Direct Investment; Production Relocation; Product Differentiation (search for similar items in EconPapers)
Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/09638190110074588 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The Decision To Invest In A Low-Wage Country: Evidence From Italian Textiles And Clothing Multinationals (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:jitecd:v:10:y:2001:i:4:p:451-470

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RJTE20

DOI: 10.1080/09638190110074588

Access Statistics for this article

The Journal of International Trade & Economic Development is currently edited by Pasquale Sgro, David E.A. Giles and Charles van Marrewijk

More articles in The Journal of International Trade & Economic Development from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().