TY  - JOUR
AU  - Chen, Tain-Jy
AU  - Ku, Ying-Hua
TI  - The Effects of Overseas Investment on Domestic Employment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10156
PY  - 2003
Y2  - December 2003
DO  - 10.3386/w10156
UR  - http://www.nber.org/papers/w10156
L1  - http://www.nber.org/papers/w10156.pdf
N1  - Author contact info:
Tain-Jy Chen
National Taiwan University
Department of Economics
21 Hsu-Chow Road
Taipei, Taiwan
REPUBLIC OF CHINA
E-Mail: tainjy@mail.cier.edu.tw

Ying-hua Ku
Chung-Hua Institution for Economic Research
No. 75 Chang-Hsing Street
Taipei, Taiwan, 106
REPUBLIC OF CHINA
E-Mail: ku@mail.cier.edu.tw
M1  - published as Tain-Jy Chen, Ying-hua Ku. "The Effect of Overseas Investment on Domestic Employment ," in Takatoshi Ito and Andrew K. Rose, editors, "International Trade in East Asia" University of Chicago Press (2005)

AB  - In this paper, we study the effects of FDI on domestic employment by examining the data of Taiwan's manufacturing industry. Treating domestic production and overseas production as two distinctive outputs from a joint production function, we may estimate the effect of overseas production on the demand for domestic labor. We found that overseas production generally reduces the demand for domestic labor as overseas products serve as a substitute for primary inputs in domestic production (substitution effect). But overseas production also allows the investor to expand its domestic output through enhanced competitiveness. The expanded domestic output leads to more employment at home (output effect). The net effect of FDI on domestic employment is a combination of substitution and output effects. For Taiwan, the net effect is positive in most cases but it differs across the labor group. Technical workers tend to benefit most from FDI, followed by managerial workers, and blue-collar workers benefit the least; indeed they may even be adversely affected. This suggests that after FDI, a reconfiguration of division of labor within a firm tend to shift the domestic production toward technology and management intensive operations.
ER  -