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Domestic impacts of outward FDI in Taiwan: Evidence from panel data of manufacturing firms

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  • Liu, Wen-Hsien
  • Tsai, Pan-Long
  • Tsay, Ching-Lung

Abstract

This paper explores how the outward FDI made by Taiwanese manufacturing firms affects their decisions on domestic employment, production, investment and income distribution. The empirical examination was carried out by utilizing a set of panel data of 1084 manufacturing firms in Taiwan over the period of 2000–2010. Taking into account the firm heterogeneity, it is found that Taiwanese outward FDI to high-wage countries (horizontal FDI) tends to have a favorable impact on domestic employment, production and investment. At the same time, the outward FDI to low-wage economies (vertical FDI) is very likely to lead to job loss and industrial hollowing out at home. In contrast, domestic income inequality is generally aggravated by outward FDI irrespective of the wage level in destination countries.

Suggested Citation

  • Liu, Wen-Hsien & Tsai, Pan-Long & Tsay, Ching-Lung, 2015. "Domestic impacts of outward FDI in Taiwan: Evidence from panel data of manufacturing firms," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 469-484.
    • Handle: RePEc:eee:reveco:v:39:y:2015:i:c:p:469-484
    DOI: 10.1016/j.iref.2015.07.011
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    Cited by:

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    2. Kazemi, Morteza & Azman-Saini, W.N.W. & Naseeem, N.A.M, 2018. "Outward Foreign Direct Investment and Domestic Output: Evidence from East Asian Economies," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 52(1), pages 297-309.
    3. Min-Lee Chan & Kannika Duangnate & Cho-Min Lin, 2020. "Performance and Cash Value of Taiwan Multinational Firms’ FDI in ASEAN," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 10(2), pages 1-2.
    4. Yang, Zhenbing & Chen, Zhuo & Shi, Qi & Yan, Bing, 2021. "Does outward foreign direct investment increase debt ratio? Firm-level evidence from China," Structural Change and Economic Dynamics, Elsevier, vol. 57(C), pages 1-12.
    5. Chun-Fang Chiang & Jin-Tan Liu & Tsai-Wei Wen, 2019. "National identity under economic integration," Journal of Population Economics, Springer;European Society for Population Economics, vol. 32(2), pages 351-367, April.
    6. Wira Ganet Aribowo, 2018. "Analysis of foreign direct investment as a comparison of macroeconomic factors in seven countries Asean 5, China and Japan during period 1996-2015," Journal of Economic Development, Environment and People, Alliance of Central-Eastern European Universities, vol. 7(4), pages 29-42, December.
    7. Hsiang-Hsi Liu & Teng-Kun Wang & Guan-Ting Liu, 2020. "Workforce Diversity Affecting on the Non-financial Performance of Taiwanese Multinational Enterprises under Different Environmental Factors: CEOs' Viewpoints," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 10(4), pages 1-7.
    8. Wang, Delu & Wang, Yadong & Jiang, Wuding & Shi, Xunpeng, 2023. "Has outward foreign direct investment alleviated industrial overcapacity in China? An empirical test of the upstream and downstream industrial links," Structural Change and Economic Dynamics, Elsevier, vol. 67(C), pages 250-263.

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    More about this item

    Keywords

    Outward FDI; Employment; Hollowing out; Income distribution;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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