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Indirect Employment Effects of Foreign Direct Investment into the UK
Author(s) -
Driffield Nigel
Publication year - 1999
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/1467-8586.00079
Subject(s) - disequilibrium , foreign direct investment , economics , productivity , investment (military) , labour economics , inward investment , differential (mechanical device) , monetary economics , macroeconomics , medicine , engineering , politics , political science , ophthalmology , law , aerospace engineering
This paper examines some of the employment consequences, broadly defined, associated with foreign inward investment. A foreign firm entering an industry in the UK will have a degree of firm‐specific advantage over the incumbent firms. This advantage is assumed to manifest itself in terms of a productivity differential over the domestic sector. As such, foreign entry will create factor market disequilibrium in the domestic sector. It is shown that such investment generates ‘employment substitution’ away from UK firms, equivalent to approximately one–fifth of all the jobs created by inward investment.