OECD Economics Department Working Papers
Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.
- ISSN: 18151973 (online)
- https://doi.org/10.1787/18151973
The Internationalisation of Production, International Outsourcing and Employment in the OECD
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: skills, trade, employment, foreign direct investment, production fragmentation
JEL:
J23: Labor and Demographic Economics / Demand and Supply of Labor / Labor Demand;
F16: International Economics / Trade / Trade and Labor Market Interactions;
F23: International Economics / International Factor Movements and International Business / Multinational Firms; International Business
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