On the heterogeneous link between outward FDI and local domestic employment in the USA.

Authors: Riccardo Crescenzi*, London School of Economics, Roberto Ganau, London School of Economics
Topics: Economic Geography, United States
Keywords: FDI, Employment, Economic Areas, Regions, USA
Session Type: Paper
Day: 4/5/2019
Start / End Time: 1:10 PM / 2:50 PM
Room: Calvert Room, Omni, East
Presentation File: No File Uploaded


The rising scepticism on the benefits of the process of global economic integration has increased public scrutiny on the foreign behaviour of domestic firms in virtually all advanced economies. Decisions to establish new activities abroad are seen as potentially detrimental to domestic employment and growth opportunities. The supposed trade-off between active international expansion and domestic employment growth is – for example – one of the targets of President Trump’s attempts to ‘bring jobs back to America’. Notwithstanding the practical relevance of this debate, limited empirical evidence is currently available on the link between outward FDI and domestic employment conditions at the sub-national level. This paper aims to fill this gap by exploring the relationship between outward greenfield FDI and employment growth in US Economic Areas (EAs) over the period 2005-2015. The results unveil a positive link between outward FDI and changes in local employment. However, this link is highly heterogeneous across sectors, regions and type of international connectivity. The benefits of outward FDI for domestic local economies are concentrated in knowledge intensive sectors and in ‘strong’ regions in terms of local labour markets.

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