Labor training and foreign direct investment

Qing LIU; Larry D. QIU

doi:10.1111/roie.12102

Labor training and foreign direct investment

Qing LIU, Larry D. QIU

Research output: Journal Publications › Journal Article (refereed) › peer-review

4 Citations (Scopus)

Abstract

Evidence shows that most foreign direct investment (FDI) flows from developed to developed countries (North–North) in skilled labor‐intensive industries. This paper builds a model that incorporates labor training into the proximity–concentration tradeoffs to analyze the entry mode of multinationals to a foreign country. Production requires both skilled labor and unskilled labor.. A multinational pursuing FDI needs to provide training to some workers in the host country to equip them with skills that are specific to the production of the firm. Labor training and skill specificity lead to contract friction. It is shown that in skilled labor‐intensive industries, FDI increases along with the economic development level of the host country, whereas in unskilled labor‐intensive industries, the reverse is true. This paper provides a theoretical explanation for the empirical findings on the prevalence of North–North FDI in skilled labor‐industries and North–South FDI in unskilled labor‐intensive industries.

Original language	English
Pages (from-to)	151-166
Number of pages	16
Journal	Review of International Economics
Volume	22
Issue number	1
Early online date	13 Jan 2014
DOIs	https://doi.org/10.1111/roie.12102
Publication status	Published - Feb 2014
Externally published	Yes

Bibliographical note

The authors thank Yi Lu, Zhigang Tao, Stephen R. Yeaple, two referees and seminar and conference participants at the Canadian Economic Association Annual Conference (2010), the European Trade Study Group Annual Conference (2012), Peking University (CTIW), the Shanghai University of Finance and Economics, the University of Hong Kong, for comments and discussions. Liu thanks financial support from National Science Foundation of China (project no. 71302009).

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10.1111/roie.12102

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title = "Labor training and foreign direct investment",

abstract = "Evidence shows that most foreign direct investment (FDI) flows from developed to developed countries (North–North) in skilled labor‐intensive industries. This paper builds a model that incorporates labor training into the proximity–concentration tradeoffs to analyze the entry mode of multinationals to a foreign country. Production requires both skilled labor and unskilled labor.. A multinational pursuing FDI needs to provide training to some workers in the host country to equip them with skills that are specific to the production of the firm. Labor training and skill specificity lead to contract friction. It is shown that in skilled labor‐intensive industries, FDI increases along with the economic development level of the host country, whereas in unskilled labor‐intensive industries, the reverse is true. This paper provides a theoretical explanation for the empirical findings on the prevalence of North–North FDI in skilled labor‐industries and North–South FDI in unskilled labor‐intensive industries.",

author = "Qing LIU and QIU, {Larry D.}",

note = "The authors thank Yi Lu, Zhigang Tao, Stephen R. Yeaple, two referees and seminar and conference participants at the Canadian Economic Association Annual Conference (2010), the European Trade Study Group Annual Conference (2012), Peking University (CTIW), the Shanghai University of Finance and Economics, the University of Hong Kong, for comments and discussions. Liu thanks financial support from National Science Foundation of China (project no. 71302009).",

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PY - 2014/2

Y1 - 2014/2

N2 - Evidence shows that most foreign direct investment (FDI) flows from developed to developed countries (North–North) in skilled labor‐intensive industries. This paper builds a model that incorporates labor training into the proximity–concentration tradeoffs to analyze the entry mode of multinationals to a foreign country. Production requires both skilled labor and unskilled labor.. A multinational pursuing FDI needs to provide training to some workers in the host country to equip them with skills that are specific to the production of the firm. Labor training and skill specificity lead to contract friction. It is shown that in skilled labor‐intensive industries, FDI increases along with the economic development level of the host country, whereas in unskilled labor‐intensive industries, the reverse is true. This paper provides a theoretical explanation for the empirical findings on the prevalence of North–North FDI in skilled labor‐industries and North–South FDI in unskilled labor‐intensive industries.

AB - Evidence shows that most foreign direct investment (FDI) flows from developed to developed countries (North–North) in skilled labor‐intensive industries. This paper builds a model that incorporates labor training into the proximity–concentration tradeoffs to analyze the entry mode of multinationals to a foreign country. Production requires both skilled labor and unskilled labor.. A multinational pursuing FDI needs to provide training to some workers in the host country to equip them with skills that are specific to the production of the firm. Labor training and skill specificity lead to contract friction. It is shown that in skilled labor‐intensive industries, FDI increases along with the economic development level of the host country, whereas in unskilled labor‐intensive industries, the reverse is true. This paper provides a theoretical explanation for the empirical findings on the prevalence of North–North FDI in skilled labor‐industries and North–South FDI in unskilled labor‐intensive industries.

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DO - 10.1111/roie.12102

M3 - Journal Article (refereed)

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VL - 22

SP - 151

EP - 166

JO - Review of International Economics

JF - Review of International Economics

IS - 1

ER -

Labor training and foreign direct investment

Abstract

Bibliographical note

UN SDGs

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