Robert E. Lipsey

FDI and Wage Spillovers in Indonesian Manufacturing

This paper examines the effect of foreign direct investment in Indonesian manufacturing on wages in locally owned Indonesian manufacturing plants. The issue is examined in a cross section of Indonesian manufacturing industries and provinces in one of the few years for which data on worker characteristics were available. Wages in locally owned plants were high in industries and industries within provinces with large foreign presence. Since the foreign plants also pay higher wages than locally owned ones, the two factors together imply that higher foreign presence raises the general wage level in a province and industry. JEL no. F2, J3

South–South FDI and Development in East Asia

This paper attempts to measure the size of South–South foreign direct investment (FDI) in developing East Asia and the trends in it, the characteristics of the investing countries, and the investments themselves. It also summarizes the findings of studies in individual countries of the effects of these investments. The studies of individual countries will be used to try to find some consensus on differences between South–South FDI and North–South FDI. Among the comparisons of the two types of FDI summarized are findings about their industrial composition; their effects on their host countries and their host-country firms’ productivity, wages, and employment; and how these differ across industries.

Japanese exports, MNC affiliates, and rivalry for export markets

Abstract The foreign operations of a countrys multinational firms (MNCs) are often thought of as competing with the home countrys exports, and thus reducing the demand for labor at home. An alternative view is that these operations are part of the competition among countries for foreign markets, including export markets, and that these foreign operations may tend to expand the home countrys exports by raising the competitiveness of home country firms in host country markets. The results in this paper suggest that the latter view is correct. The level of Japans manufactured exports to a country is positively related to employment in foreign manufacturing affiliates of Japanese MNCs in that country. However, Japanese exports to a host country are negatively related to employment in affiliates of US MNCs in that country. Changes in Japanese exports to a market over a period are also positively related to both the initial level of Japanese affiliate employment and to changes in it, but negatively related to the initial level of US affiliate employment. The economic activities of Japanese manufacturing affiliates promote Japanese exports, while the activities of competing MNCs (US affiliates) reduce Japanese exports.

Foreign Ownership and Employment Growth in a Developing Country

Many developing countries would like to increase employment in the formal sectors. One way to accomplish this goal may be to encourage the entrance of foreign firms. We examine employment growth in Indonesian plants taken over by foreign owners from domestic ones. We also examine the effect of FDI during different trade regimes and the timing of employment effects following an acquisition. For plants that change the nationality of ownership, we find a strong effect of shifts from domestic to foreign ownership in raising the growth rate of employment, but no significant effects of shifts from foreign to domestic ownership.

The Competitiveness of Countries and Their Multinational Firms

Analyses of international competitiveness and comparative advantage focus on the characteristics and behaviour of countries. They generally assign the responsibility for changes in countries’ competitiveness to macroeconomic developments and for changes in comparative advantage to changes in factor abundance and factor prices, to industry productivity developments, or to economies of scale in production. There is also another strand of literature that attributes changes in competitiveness to more ‘structural’ developments, in the sense that they are more deeply imbedded and long term, and not subject to manipulation by macroeconomic policy. These include changes in the aggregate productivity of the country, its workers, and its firms relative to those of its competitors. Recent discussions of US trade problems have emphasised factors of the second type, in particular worker skills or motivation, or the innovativeness, inventiveness, management abilities, and technological capabilities of US firms, all or some of which have supposedly declined.

US multinationals in Latin American service industries

Abstract The participation of US service industry firms in Latin America markets for services consists mainly of the activities of US-owned affiliates operating in Latin America and very little of direct exports of services from the United States. The important policy issues, thus, involve barriers to the establishment and operation of affiliates in host countries rather than trade barriers. The main distinctive feature of the service industries, as compared with goods industries, is the similarity in physical capital intensity and human capital intensity among parents, affiliates in developed countries, and affiliates in Latin America. The data suggest that, because many services are difficult to trade, service industry affiliates are less likely than manufacturing industry affiliates to be part of a worldwide allocation of production by multinationals to take advantage of differences in factor prices. US shares in the Latin American service sector are also found to be very small overall, and not likely to reach the levels in manufacturing or petroleum in the foreseeable future.

Recent Trends in U.S. Trade and Investment

This paper reviews some of the main recent developments in U.S.trade and overseas investment against the background of long-term trends.The United States, and particularly the agricultural sector, has become more linked with the rest of the world. The commodity distributionof trade has moved toward being in large part an exchange of U.S. manufactured goods for other countriest manufactures even though the shareof developed countries in U.S. trade has declined. The fall in the U.S.share of world trade which began around 1950 has slowed down or evenstopped, as has the fall in the terms of trade of the United States andother developed countries.The U.S. share of new direct investment outflows has fallen while that of Japan and Germany have increased, but the United States has become one of the major recipients of direct investment from other countries. U.S. firms have increasingly accepted less than 100 per cent or even majority ownership, but majority ownership is still the usual form,by a large margin, in industries in which technology is important.U.S.-owned affiliates in foreign countries, particularly those in the smaller Asian countries, have shifted their activities towards exporting.In most areas U.S. affiliates increased their exports more in recent years than did other firms in their host countries, thus increasing their share of exports from these countries.