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The impact of Inward FDI on host country labour markets. A counterfactual analysis on Italian manufacturing companies

Author

Listed:
  • Mariachiara Barzotto

    (Birmingham Business School, University of Birmingham)

  • Giancarlo Corò

    (Ca’ Foscari University Venice)

  • Ilaria Mariotti

    (DAStU – Polytechinic of Milan)

  • Marco Mutinelli

    (University of Brescia)

Abstract
Countries are increasingly competing to attract inward foreign direct investments (FDIs) to benefit from the superior performance of the international firms. Yet there is still scant evidence about the effects of inward FDIs on the high-income countries’ industrial base. In advanced economies a specialised, skilled workforce has emerged as a pivotal economic development asset to enhance innovation capabilities. The paper aims at investigating how the use of a local, skilled workforce differs according to the firms’ ownership; being either affiliates of foreign multinationals (MNEs), or uni-national firms (firms that have neither been acquired in the period of analysis, nor have invested abroad; henceforth NATs). We empirically investigate this issue by adopting a novel database linking regional labour force characteristics with economic data on inward FDIs and NATs, operating in the manufacturing industry in the Veneto NUTS2 region (northeast of Italy) between 2007 and 2013. Descriptive statistics and counterfactual estimation have been developed, focusing on firms’ skill composition (e.g. skill level, age, gender and nationality). The results show that the two groups of firms differ in terms of workforce skill composition, and the affiliates of foreign MNEs positively impact on the regeneration of the host country’s human capital by attracting and employing a wider share of more highly skilled labour force.

Suggested Citation

  • Mariachiara Barzotto & Giancarlo Corò & Ilaria Mariotti & Marco Mutinelli, 2016. "The impact of Inward FDI on host country labour markets. A counterfactual analysis on Italian manufacturing companies," Working Papers 1612, c.MET-05 - Centro Interuniversitario di Economia Applicata alle Politiche per L'industria, lo Sviluppo locale e l'Internazionalizzazione.
    • Handle: RePEc:cme:wpaper:1612
    as

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    Keywords

    Host Country; Labour Market; Advanced Economies; Skill Composition; Propensity Score; Manufacturing Industry; FDI;
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