Effects of Outward Manufacturing FDI on Local Employment: Evidence from matched data on foreign affiliates, domestic parents, and domestic plants in Japan

Kozo Kiyota, Kentaro Nakajima and Miho Takizawa

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: This study examines the effects of outward manufacturing foreign direct investment (FDI) on the local labor market. One of its contributions is investigating possible spillover effects from FDI firms to non-FDI firms. To do so, we develop unique matched data on foreign affiliates, domestic parents, and domestic plants in Japan from 2001 to 2016. Our results suggest that outward manufacturing FDI positively affects local manufacturing employment in Japan. Specifically, we find that a 1 percent increase in foreign manufacturing employment leads to a 0.9 percent increase in local employment. However, this positive employment effect is observed in non-FDI firms, not FDI firms. Outward FDI by FDI firms positively affects the output, exports, and employment of non-FDI firms in the same local market.

Pages: 42 pages
Date: 2022-03
New Economics Papers: this item is included in nep-int and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:22013

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