The Effects of FDI on Domestic Employment and Workforce Composition

Author Name TANAKA Ayumu  (Fellow, RIETI)
Creation Date/NO. October 2012 12-E-069
Research Project Study of the Creation of the Japanese Economy and Trade and Direct Investment
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This study uses propensity score matching techniques to examine the effects on domestic employment of Japanese manufacturing, wholesale, and service sector firms that initiated foreign direct investment (FDI) during 2003-2005. Results reveal that, in all three sectors, employment growth was higher among firms that initiated FDI than those that remained exclusively domestic. Moreover, manufacturing firms experienced higher growth in the share of non-regular workers. In addition, empirical results indicate that FDI's positive employment effects were accompanied by positive impacts on overall sales and/or exports. Positive impacts on export sales in manufacturing and wholesale sectors and on overall sales in manufacturing and services sectors were found.