The Internationalisation of Production, International Outsourcing and Employment in the OECD

OECD Economics Department Working Paper No. 561

74 Pages Posted: 7 Nov 2007

See all articles by Margit Molnar

Margit Molnar

Organization for Economic Co-Operation and Development (OECD)

Nigel Pain

Organization for Economic Co-Operation and Development (OECD)

Daria Taglioni

World Bank, Development Economics

Date Written: July 4, 2007

Abstract

This paper reviews some of the possible changes that may occur in the national labour markets of many OECD countries as a result of international trade and the internationalisation of production by multinational companies, with a particular focus on the impact of outward foreign direct investment (FDI) from OECD countries on employment in the home country of the investing firms. Existing studies suggest that the overall impact of trade and the internationalisation of production on aggregate labour market outcomes has been comparatively small, although particular skill and occupational groups have been affected more strongly. The empirical findings in the paper suggest that the aggregate employment impact of outward FDI varies across industries and countries. For manufacturing industries with strong commercial links with the non-OECD economies, there is evidence that domestic employment has become more sensitive to movements in domestic labour costs. At the country level, the growth of outward investment is found to have a significant positive effect on domestic employment growth in the United States. In contrast, there is a negative association in Japan, especially from outward investment in China.

Keywords: trade, employment, emploi, foreign direct investment, investissement direct étranger, commerce, production fragmentation, fragmentation de la production, qualifications, skills

JEL Classification: F16, F23, J23

Suggested Citation

Molnar, Margit and Pain, Nigel and Taglioni, Daria, The Internationalisation of Production, International Outsourcing and Employment in the OECD (July 4, 2007). OECD Economics Department Working Paper No. 561, Available at SSRN: https://ssrn.com/abstract=1027467 or http://dx.doi.org/10.2139/ssrn.1027467

Margit Molnar

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Nigel Pain (Contact Author)

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Daria Taglioni

World Bank, Development Economics ( email )

Washington, DC 20433
United States

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