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The Effect of Outward Foreign Direct Investments on Home Employment: Evidence using Swiss Firm-Level Data

Daniel Steffen Preetha Kalambaden

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft - CRED

Abstract: This paper investigates the effect of outward foreign direct investments (FDI) on home employment in an understudied context - a small economy with a large relative outward FDI stock. Using Swiss firm-level data we construct a novel instrumental variable to identify a direct negative displacement effect and an indirect positive output effect. We find that FDI to high-income countries have a positive effect on domestic jobs, while FDI to lower middle-income countries are associated with a loss of domestic jobs. Further, FDI to low-income countries tend to have a positive effect on home employment. Overall, the effect of outward FDI on home employment is small and tends to create more domestic jobs than it relocates.

Keywords: Foreign direct investments; home employment; multinational firms; globalization (search for similar items in EconPapers)
JEL-codes: F14 F16 F23 F66 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-bec, nep-int and nep-sbm
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