Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 468: Foreign Direct Investment, Capital Formation and Labour Costs: Theory and Evidence for Germany

Jan Hatzius
Additional contact information
Jan Hatzius: London School of Economics

Abstract: This paper shows that the liberalisation of foreign direct investment (FDI) tends to make the effect of labour costs on domestic investment and labour demand more negative. Using data from Germany, it then provides evidence 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.

Keywords: INVESTMENTS; LABOUR MARKET

JEL-codes: F33; J21; O16

31 pages, September 1996

Full text files

wp468.pdf PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Elisabeth Gustafsson ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:34:24.