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Foreign direct investment, heterogeneous workers and employment security: Evidence from Germany

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  • Ronald Bachmann
  • Daniel Baumgarten
  • Joel Stiebale

Abstract

We analyze how foreign direct investment (FDI) affects employment security using administrative microdata for German employees. Measuring FDI intensity at the industry level enables us to take into account the sum of direct effects at multinationals as well as indirect effects of FDI throughout the affected industry. We find that both inward and outward FDI significantly reduce employment security. This is particularly the case for inward FDI coming from the western part of the European Union as well as for outward FDI going to Central and Eastern Europe. The effects are sizeable for older and low‐skilled workers. Investissement direct à l'étranger, travailleurs hétérogènes, et sécurité d'emploi : résultats pour l'Allemagne. On analyse l'effet de l'investissement direct à l'étranger sur la sécurité d'emploi à l'aide de micro‐données administratives pour les travailleurs allemands. Mesurant l'intensité de l'investissement à l'étranger au niveau de l'industrie permet de prendre en compte tant la somme des effets directs sur les plurinationales que les effets indirects sur l'industrie affectée. On découvre que tant les investissements de l'étranger que vers l'étranger réduisent la sécurité d'emploi. C'est en particulier la cas des investissements directs de l'étranger en provenance de la portion occidentale de l'Union européenne, et des investissements directs vers l'étranger à destination de l'Europe centrale et de l'Europe de l'Est. Les effets sont significatifs pour les travailleurs plus âgés et moins spécialisés.

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  • Ronald Bachmann & Daniel Baumgarten & Joel Stiebale, 2014. "Foreign direct investment, heterogeneous workers and employment security: Evidence from Germany," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(3), pages 720-757, August.
    • Handle: RePEc:wly:canjec:v:47:y:2014:i:3:p:720-757
    DOI: 10.1111/caje.12094
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    Cited by:

    1. Borrs, Linda & Eppelsheimer, Johann, 2020. "The effects of foreign direct investment on job stability: Upgrades, downgrades, and separations," IAB-Discussion Paper 202024, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    2. Bachmann, Ronald & Gonschor, Myrielle & Lewandowski, Piotr & Madoń, Karol, 2022. "The impact of robots on labour market transitions in Europe," Ruhr Economic Papers 933, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen, revised 2022.
    3. Ignat Stepanok, 2023. "FDI and unemployment, a growth perspective," Review of International Economics, Wiley Blackwell, vol. 31(2), pages 761-783, May.
    4. Chiappini, Raphaël & Coupaud, Marine & Viaud, François, 2022. "Does attracting FDI affect population health? New evidence from a multi-dimensional measure of health," Social Science & Medicine, Elsevier, vol. 301(C).
    5. Amit Soni & Avinash Chandra & Sumati Varma, 2020. "Impact of M&As on Employment in the Indian Information Technology (IT) Industry," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 63(2), pages 311-329, June.
    6. Anna Goeddeke & Justus Haucap & Annika Herr & Christian Wey, 2018. "Flexibility in Wage Setting Under the Threat of Relocation," LABOUR, CEIS, vol. 32(1), pages 1-22, March.
    7. Budría, Santiago & Milgram Baleix, Juliette, 2020. "Offshoring, job satisfaction and job insecurity," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 14, pages 1-32.
    8. Hedieh Aghelmaleki & Ronald Bachmann & Joel Stiebale, 2022. "The China Shock, Employment Protection, and European Jobs," ILR Review, Cornell University, ILR School, vol. 75(5), pages 1269-1293, October.
    9. Koerner, Konstantin & Borrs, Linda & Eppelsheimer, Johann, 2023. "FDI and onshore job stability: Upgrades, downgrades, and separations in multinationals," European Economic Review, Elsevier, vol. 152(C).

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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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