Domestic Repercussions of Different Types of FDI

It is widely feared that outward FDI gradually hollows out domestic manufacturing and displaces local workers. We address this concern by drawing on exceptionally We would like to thank Michaela Rank for excellent research assistance. orresponding author) l In te for the World Economy D Weg 120, 05 , Germany ne: -431-8814-269 +4 31-8814-500 ail [email protected] Peter NUNNENKAMP l Institute for the World Econom Duesternbrooker Weg 120, 05 Kiel, Germany ne: +49-431-8814-209 +49-431-8814-500 -k ail: peter-nunnenkamp@ifw informative firm-specific data on Taiwanese multinationals in manufacturing. In particular, we assess whether repercussions at home depend on the size, location and type of outward FDI. We control for firm heterogeneity and estimate ordered probit models with the firms’ own assessment of domestic production and employment effects as dependent variables. We find that the probability of negative effects increases slightly with the size of FDI. The effects of locating in China differ from those of locating in advanced countries not only in size but also in sign. In contrast to vertical and export-platform FDI, employment effects of horizontal FDI tend to be positive. The quantitative impact is typically small, however.