More documents from Dewit, Gerda; Görg, Holger; Montagna, Catia
More documents from Review of World Economics

Export to your Reference Manger

Please Copy & Paste



Bookmark and Share

Should I stay or should I go? Foreign direct investment, employment protection and domestic anchorage

[journal article]

Dewit, Gerda; Görg, Holger; Montagna, Catia

fulltextDownloadDownload full text

(280 KByte)

Citation Suggestion

Please use the following Persistent Identifier (PID) to cite this document:

Further Details
Abstract This paper examines theoretically and empirically how employment protection legislation affects location decisions of multinationals. We depart from the "conventional wisdom" by examining not only the effect of protection on inward foreign direct investment (FDI), but also a country's ability to "anchor" potential outward investment. Based on our simple theoretical framework, we estimate an empirical model, using data on bilateral FDI and employment protection indices for OECD countries, and controlling for other labour market institutions and investment costs. We find that, while an "unfavourable" employment protection differential between a domestic and a foreign location is inimical to FDI, a high domestic level of employment protection tends to discourage outward FDI. The results are in line with our conjecture that strict employment protection in the firm's home country makes firms reluctant to relocate abroad and keeps them "anchored" at home.
Classification Political Economy; Labor Market Research
Free Keywords Foreign direct investment; Employment protection; Domestic anchorage; Uncertainty; F23; J80; D80
Document language English
Publication Year 2009
Page/Pages p. 93-110
Journal Review of World Economics, 145 (2009) 1
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)