To Whom Does Outward FDI Give Jobs?

Abstract

This study used the Korean industry-level data for the period of 2007-2014 to decompose the effects of outward foreign direct investment (OFDI) on overall domestic employment into the forms of OFDI, workers' skill level and employment status. The main finding is that OFDI has no effect on the overall employment of permanent workers, while it is positively associated with the overall employment of temporary workers. These results possibly indicate that the MNEs initiating FDI, at least in Korea, prefer employing temporary workers rather than permanent workers when the success of their FDI is not clearly visible. Given the high degree of labor market rigidity in Korea, these results seem legitimate and self-explaining. Although there is little evidence that OFDI has an impact on overall domestic employment, especially for permanent workers, there does exist heterogeneous effects of OFDI on employment depending on the types of FDI, workers' skill level and employment status.