There is plenty of arguments and evidence as why FDI in LDCs do not
displace jobs in the home countries in the same magnitude as popular
perceptions might warrant. The reason is different segments of the
production process or different types of production are normally farmed
out. In other words skill intensities vary. However, this does not mean
that home countries do not suffer from job losses in those sectors. The
losses result from technological change. Un- semi-skilled work tends to
get technologically substituted in the home country because of high wage
costs. Low wage imports add to that burden. On the average, skill
intensity of imports from LDcs tend to be much lower than competing
industries in the home country. Most importantly, on the average, FDI is
not determined by low wages. If that were the case, we would not have
about 70% of global FDI taking place within the triad (US, WEur, Japan).
Anthony P. D'Costa
Associate Professor
Comparative International Development
University of Washington
1900 Commerce Street
Tacoma, WA 98402, USA
Phone: (253) 692-4462
Fax : (253) 692-5612
On Tue, 15 Dec 1998, Tom Kruse wrote:
> We read:
>
> >BLS DAILY REPORT, MONDAY, DECEMBER 14, 1998
>
> [snip]
>
> >Outflows of foreign direct investment from rich to poor countries are having
> >only a limited negative impact on employment in source economies, according
> >to the Bank for International Settlements. ... "Fears that jobs are being
> >destroyed in the industrialized countries when multinational enterprises
> >invest in low-wage countries are only in part supported by the evidence,"
> >according to a working paper prepared by the bank. ... The authors point
> >out that because of the low degree of substitution between employees in
> >parent companies and their affiliates abroad, even where there may be some
> >displacement of home-country workers due to Foreign Direct Investment, "such
> >effects are likely to have been only moderate" ... (Daily Labor Report,
> >page A-9).
>
> Comments anyone? This would seem to really challenge the "exporting
> manufacturing and other good jobs" thesis of globalization. I suppose we'd
> first need to know what "only in part" means. And what exaclty does
> substitution mean? That the overseas worker directly substitutes the US
> worker? What if in the transfer of the production process innovation
> occurs, eliminating a one-to-one correpsondence between jobs before in the
> US and jobs after overseas? Any insights?
>
> Tom
>
> Tom Kruse
> Casilla 5812 / Cochabamba, Bolivia
> Tel/Fax: (591-4) 248242
> Email: [EMAIL PROTECTED]
>
>
