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Does It Matter Where You Invest? The Impact of FDI on Domestic Job Creation and Destruction

BiN Ni (), Hayato Kato and Yang Liu ()
Additional contact information
BiN Ni: Faculty of Economics, Hosei University, Machida, Tokyo, Japan.
Yang Liu: Research Institute of Economy, Trade and Industry (RIETI)

No 20-18, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This study uses unique division-level data of Japanese firms to examine how foreign direct investment (FDI) affects domestic employment. Contrary to most previous studies focusing on the effect on net employment growth, we decompose it into gross job creation and gross job destruction. We find that FDI destination plays an important role: FDI to Asia increases job creation, while FDI to Europe or North America decreases it. A frictional search-and-matching model with heterogeneous jobs can explain the differential effects. The model provides additional predictions on job creation and destruction by job type, which are also empirically confirmed.

Keywords: Outward FDI; firm-establishment-division-level data; multinational enterprises(MNEs); large-firm search model; high/low-skilled jobs (search for similar items in EconPapers)
JEL-codes: F23 J21 J23 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2021-01
New Economics Papers: this item is included in nep-cwa, nep-int, nep-lma, nep-sbm and nep-sea
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http://www2.econ.osaka-u.ac.jp/econ_society/dp/2018.pdf (application/pdf)

Related works:
Working Paper: Does It Matter Where You Invest? The Impact of FDI on Domestic Job Creation and Destruction (2021) Downloads
Working Paper: Does It Matter Where You Invest? The Impact of FDI on Domestic Job Creation and Destruction (2020) Downloads
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