Should I stay or should I go? A note on employment protection, domestic anchorage, and FDI

Gerda Dewit, G. Holger and Catia Montagna
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G. Holger: University of Nottingham and IZA Bonn

Economics Department Working Paper Series from Department of Economics, National University of Ireland - Maynooth

Abstract: This paper examines how employment protection legislation affects location decisions of multinationals. Based on a simple theoretical framework, we estimate an empirical model, using OECD-data on bilateral FDI-flows and employment protection indices. We find that, while an “unfavourable” employment protection differential between a domestic and a foreign location is inimical to foreign direct investment (FDI), a high domestic level of employment protection tends to discourage outward FDI. The results are in line with our conjecture that strict employment protection in the firm’s home country makes firms reluctant to relocate abroad and keeps them “anchored” at home.

Keywords: Uncertainty; employment protection; foreign direct investment; domestic anchorage (search for similar items in EconPapers)
JEL-codes: D80 F23 J80 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2003-10
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Should I Stay or Should I Go? A Note on Employment Protection, Domestic Anchorage and FDI (2003)
Working Paper: Should I Stay or Should I Go? A Note on Employment Protection, Domestic Anchorage, and FDI (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:may:mayecw:n1291003

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