The impact of foreign direct investment in China on employment adjustments in Taiwan: Evidence from matched employer-employee data

Meng Wen Tsou, Jin Tan Liu, James K. Hammitt, Ching Fu Chang

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

Using a unique matched employer-employee dataset on Taiwanese manufacturing, we examine the impact of foreign direct investment in China on domestic employment adjustments controlling for firm and worker heterogeneity as well as for potential endogeneity of firms' expansion in China. Our findings suggest that workers employed at firms with higher levels of investment in China are more likely to leave the firm, compared with workers at firms with zero or lower levels of investment in China. We provide evidence that foreign expansion in China decreases worker employment security at parent companies, particularly for low-skilled workers. Employment adjustments through employer-to-employer transitions are found to be highly associated with wage losses, with the strongest wage effects for low-skilled workers who shift employment between industries. Moreover, we find no evidence that FDI in China contributes to skill upgrading at parent companies.

Original languageEnglish
Pages (from-to)68-79
Number of pages12
JournalJapan and the World Economy
Volume25-26
DOIs
StatePublished - Jan 2013

Keywords

  • Employer-to-employer transition
  • Employment adjustment
  • Foreign direct investment
  • Matched employer-employee data
  • Worker mobility

Fingerprint

Dive into the research topics of 'The impact of foreign direct investment in China on employment adjustments in Taiwan: Evidence from matched employer-employee data'. Together they form a unique fingerprint.

Cite this