Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/3039
Authors: 
Dewit, Gerda
Görg, Holger
Montagna, Catia
Year of Publication: 
2003
Series/Report no.: 
IZA Discussion Papers 845
Abstract: 
This paper examines how employment protection legislation affects location decisions of multinationals. Based on a simple theoretical framework, we estimate an empirical model, using OECD-data on bilateral FDI-flows and employment protection indices. We find that, while an ?unfavourable? employment protection differential between a domestic and a foreign location is inimical to foreign direct investment (FDI), a high domestic level of employment protection tends to discourage outward FDI. The results are in line with our conjecture that strict employment protection in the firm?s home country makes firms reluctant to relocate abroad and keeps them ?anchored? at home.
Subjects: 
uncertainty , employment protection , foreign direct investment , domestic anchorage
JEL: 
D80
J80
F23
Document Type: 
Working Paper

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