Migration outflows and optimal migration policy: rules versus discretion

We study the effects of more open borders on return migration and show that migrants are more likely to return to the origin country when migration rules are softened, because this implies that they could more easily re-migrate if return migration is unsuccessful. As a result, softening migration rules leads to lower net inflows than is generally acknowledged. We show that if government follows rules to shape the optimal migration policy, it will choose more open “borders” than were its behaviour to be discretionary. However, this requires an appropriate commitment technology. We show that electoral accountability may be a solution to the commitment problem. As a matter of fact, observed softer immigration rules in western countries suggest the effectiveness of such a mechanism.info:eu-repo/semantics/publishedVersio

Does Foreign Direct Investment Stimulate New Firm Creation? In Search of Spillovers through Industrial and Geographical Linkages

This paper examines the spillover effects of inward foreign direct investment (FDI) on the entrepreneurial activities of new firm creation through both industrial and geographical linkages. Using a dataset of 44,434 newly created small firms in 234 regions of South Korea in 2000–2004, this study finds that while the spillover impacts of FDI in the low-tech industry are positive and significant across almost all four possible combinations of the intra-/inter-regional and intra-/inter-sectoral channels, the impacts in the high-tech industry are largely intra-sectoral within the host region and across neighboring regions. Moreover, all statistically significant spillover effects follow an inverted ‘U’-shaped curvilinear trend

Simultaneous Impact of the Presence of Foreign MNEs on Indigenous Firms’ Exports and Domestic Sales

YesIncorporating the global production network approach and competitor analysis, this paper establishes an analytical framework with two hypotheses for the role of foreign multinational enterprises (FMNEs) in indigenous firms’ exports and domestic sales. First, the presence of FMNEs as a whole is likely to have a negative impact on indigenous firms’ domestic sales but a simultaneous positive impact on their exports in an emerging economy like China. Second, the presence of MNEs from Hong Kong, Macau and Taiwan (HMT MNEs) is more likely to generate this pattern of impact than MNEs from other countries (Other FMNEs). The FDI-led export strategy contributed to the dominance of the scenario described by the first hypothesis in China, while a higher degree of market commonality and resource similarity of HMT MNEs with that of indigenous Chinese firms than Other FMNEs leads to the second hypothesis. These novel hypotheses are tested and supported by a very large and recent firm-level panel dataset from Chinese manufacturing

Political connections and corporate financial decision making

This paper investigates whether and how political connections influence managerial financial decisions. Our study reveals that those firms that have a politician on its board of directors are highly leveraged, use more long-term debt, hold large excess cash and are associated with low quality financial reporting compared to their non-connected counterparts. These effects escalate with the strength of the connected politician and whether he or his party is in power. The winning party effect is observed to be stronger than victory by the politician himself. Overall, our paper provides strong evidence that political connection is a two-edged sword. It is indeed a valuable resource for connected firms, but it comes at a cost of higher agency problems

Crowds in or crowds out? The effect of foreign direct investment on domestic investment in Chinese cities

This study investigates the empirical relationship between foreign direct investment (FDI) and domestic investment (DI) in China using a comprehensive city-level panel over the period from 2003 to 2011. System-generalized method-of-moment estimation reveals mixed results. At the national level, FDI neither crowds in nor crowds out DI, indicating a neutral FDI–DI nexus. However, when the full sample is segmented by geographical topology, a positive and significant FDI–DI nexus can be found in eastern and, to a lesser extent, central cities. A negative, although insignificant, association is reported among western cities. Further, the empirical nexus is conditional on several local absorptive capacities including human capital, financial development, and institutional quality. These findings suggest that a region-based FDI strategy in general and local governments should strengthen their absorptive capacities to fully internalize FDI spillovers

Industry agglomeration, sub-national institutions and the profitability of foreign subsidiaries

This study investigates the impact of agglomeration and its interaction with subnational institutions on the profitability of multinational enterprises (MNEs) subsidiaries operating in an emerging economy. We argue that in an emerging economy like China, competition in product and factor markets is more intense between foreign firms than between foreign and domestic firms owing to market segmentation. Consequently, agglomerating with other foreign firms has negative impact on the profitability of foreign subsidiaries. In contrast, foreign firms agglomerating with domestic firms may reap gains owing to less competition and improved access to local resources and knowledge. We find that these effects are more pronounced to domestic-market-oriented foreign firms. Furthermore, sub-national institutions moderate the above relationships. Our arguments are supported by the empirical analysis based on a comprehensive dataset of foreign firms operating in China over the period of 1999-2005

FDI in hot labour markets: The implications of the war for talent

This paper highlights an inherent contradiction that exists within investment promotion activities in rich countries. Since the financial crisis, many inward investment agencies have shifted their activities from job creation per se to seeking to attract investment in high-tech activities. Such knowledge-intensive sectors are engaged in what has become referred to as “the war for talent”, so locations need to understand their value proposition to firms, especially where labour is tight. This paper explores the implications of this, in terms of the impact on employment and earnings of high skilled labour. We show that, because skill shortages already exist in many of these sectors, seeking to attract inward investment in these sectors simply causes the earnings of such workers to be bid up, and employment in the incumbent sector to fall. We highlight the over-riding importance that firms place on the availability of skilled labour when determining locations, and how policies which promote labour market flexibility, particularly through investment in skills to address skill shortages, can significantly mitigate the adverse effects, which tend to be more keenly felt in poorer regions of Europe where skilled labour is in even shorter supply

Transplanting corporate culture across international borders: Foreign direct investment and female employment in Japan

This paper examines the effect of foreign ownership on gender‐related employment outcomes and work practices in Japan. The data indicate that the proportion of females among workers, managers, directors and board members is higher in foreign affiliates than in domestic firms of comparable size operating in the same industry. Foreign affiliates are also more likely to offer flexible working arrangements, telecommuting and childcare subsidies as well as employ foreign workers. These effects are visible almost exclusively in older affiliates. The analysis of foreign acquisitions combining propensity score matching with a difference in differences suggests that increase in the female labour share takes place a few years after the ownership change. All these patterns are in line with the view that it takes time to transplant corporate culture to an overseas affiliate

Transplanting corporate culture across international borders: Foreign direct investment and female employment in Japan

This paper examines the effect of foreign ownership on gender‐related employment outcomes and work practices in Japan. The data indicate that the proportion of females among workers, managers, directors and board members is higher in foreign affiliates than in domestic firms of comparable size operating in the same industry. Foreign affiliates are also more likely to offer flexible working arrangements, telecommuting and childcare subsidies as well as employ foreign workers. These effects are visible almost exclusively in older affiliates. The analysis of foreign acquisitions combining propensity score matching with a difference in differences suggests that increase in the female labour share takes place a few years after the ownership change. All these patterns are in line with the view that it takes time to transplant corporate culture to an overseas affiliate