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Foreign Direct Investment

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  • J Hatzius

Abstract

This paper argues that the liberalisation of foregin direct investment (FDI) has made labour costs more important to domestic investment and long-run labour demand. It provides evidence from British and German data that is consistent with this view. First, high unit labour costs increase FDI outflows and lower FDI inflows. Second, the effect of unit labour costs on domestic manufacturing investment was more negative in the high-FDI 1980s than in the low-FDI 1970s, and this change was concentrated in high-FDI industries. The implied effect on long-run labour demand is substantial.

Suggested Citation

  • J Hatzius, 1997. "Foreign Direct Investment," CEP Discussion Papers dp0336, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp0336
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    Cited by:

    1. Ahmad Seyf, 2001. "Can Globalisation and Global Localisation Explain Foreign Direct Investment? Japanese Firms in Europe," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 8(1), pages 137-153.
    2. Engelbert Stockhammer & Stefan Ederer, 2008. "Demand effects of the falling wage share in Austria," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 35(5), pages 481-502, December.
    3. Enrico Pennings, "undated". "How to Maximize Domestic Benefits from Irreversible Foreign Investments," Working Papers 205, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    4. Brada, Josef C. & Kutan, Ali M. & Yigit, Taner M., 2004. "The effects of transition and political instability on foreign direct investment inflows: Central Europe and the Balkans," ZEI Working Papers B 33-2004, University of Bonn, ZEI - Center for European Integration Studies.
    5. Kirsi Zongo & Mahamadou Diarra, 2022. "Exchange Rate Misalignments, Foreign Direct Investment and Industrial Performance in Sub-Saharan Africa [Désalignements du taux de change, investissements directs étrangers et performances industri," Working Papers hal-03649887, HAL.
    6. Adam Swain, 1998. "Governing the Workplace: The Workplace and Regional Development Implications of Automotive Foreign Direct Investment in Hungary," Regional Studies, Taylor & Francis Journals, vol. 32(7), pages 653-671.
    7. Andrzej Adamczyk & Tomasz Tokarski & Robert W. Włodarczyk, 2009. "Przestrzenne zróżnicowanie płac w Polsce," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 9, pages 87-108.
    8. Enrico Pennings & Carlo Altomonte, 2006. "The Hazard Rate of Foreign Direct Investment: A Structural Estimation of a Real‐option Model," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(5), pages 569-593, October.

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