Social Competition and Firms' Location Choices

Vincent Delbecque, Isabelle Mejean and Lise Patureau ()

Working Papers from CEPII research center

Abstract: The paper evaluates the empirical effect of labor market institutions on foreign direct investment (FDI) decisions. To that aim, a firm-level dataset is used, that describes French firms’ expansion strategies abroad over the 1992-2002 period. Following Head and Mayer (2004b), the determinants of individual FDI decisions are estimated by implementing a discrete choice model on all possible foreign locations. The estimated equation is derived from a partialequilibrium model combining elements of the new economic geography literature and the labor market literature. We find that labor market institutions do impact French firms’ location decisions. Our overall results suggest that labor market rigidity puts a brake on the host country’s attractiveness. More detailed analysis shows that the estimated effects depend on the sample of countries considered as potential locations. French firms are found to be much more sensitive to the design of labor market institutions when FDI decisions take place within the set of industrialized OECD countries.

Keywords: Labor market institutions; foreign direct investment determinants; firm-level data (search for similar items in EconPapers)
JEL-codes: F16 F21 J30 (search for similar items in EconPapers)
Date: 2008-07
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepidt:2008-12

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