Ilaria Mariotti, Politecnico di Milano, Dipartimento di Ingegneria Gestionale, Milan, Italy, Lucia Piscitello, Politecnico di Milano, Milano, Italy
Outward FDI and skill upgrading in Italian industrial districts (assigned to theme
The effects of internationalisation on the host and home labour market has attracted the interest in the scientific as well as in the public debate for its social and economic consequences. However, especially for the latter, the evidence is still scanty, mainly because of the lack of detailed data. According to the theoretical literature, outward foreign direct investment (FDI) might induce a change in the labour intensity and in the employment composition in the home country (Brainard and Riker, 1997; Lipsey, 1999; Head and Ries, 2002; Mariotti et al., 2003), which depends on the type of the investment itself. Indeed, horizontal FDI replicates the complete production structure of the home country, while vertical FDI requires the transfer of part of the production process towards low-cost and less developed countries (Markusen et al., 1996; Agarwal, 1997). Therefore, while horizontal FDI, mainly directed towards advanced countries, has been shown to increase the labour intensity of the home country domestic production, vertical FDI tends to reduce it (Blomström et al., 1997; Brainard and Riker, 1997; Faini et al., 1998; Lipsey, 1999; Braconier and Ekholm, 2000; Mariotti et al., 2003). However, the literature on the impact of FDI on the employment composition (skill upgrading) is less extensive and far from being conclusive (Feenstra and Hanson, 1996; Slaughter, 2000; Hansson, 2001; Head and Ries, 2002). The purpose of the present paper is to investigate the influence of outward FDI by Italian districts on the employment level and composition within the districts. Considering the district as the unit of analysis allows us to capture both direct and indirect effects of foreign production on the parent’s environment (suppliers, customers, competitors, etc.), which arise through the generation of linkages and externalities. The issue will be addressed using the Reprint database on foreign manufacturing affiliates by Italian firms in 1996-2003 and the INPS (National Social Security Institute) data on the salaried employees for the same period. Specifically, as the latter allows to distinguish four categories of employees (managers, clerks, manual workers and apprentices), it will be possible to test whether and how employment composition changes within the districts, if any, may be associated to outward FDI. The present paper is organised as follows. A general introduction is followed by the literary review on the effects of outward FDI on domestic employment, in terms of labour intensity and skill upgrading. Section three describes the data employed and the model developed. The main results of the econometric analysis are presented in section four. Section five concludes the paper.
submitted 2005-05-01 12:00:06.430
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