TY  - JOUR
AU  - Figlio,David N.
AU  - Blonigen,Bruce A.
TI  - The Effects of Direct Foreign Investment on Local Communities
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7274
PY  - 1999
Y2  - July 1999
UR  - http://www.nber.org/papers/w7274
L1  - http://www.nber.org/papers/w7274.pdf
N1  - Author contact info:
David N. Figlio
Institute for Policy Research
Northwestern University
2040 Sheridan Road
Evanston, IL 60208
Tel: 847-467-1503
Fax: 847-491-9916
E-Mail: figlio@northwestern.edu

Bruce Blonigen
Department of Economics
1285 University of Oregon
Eugene, OR 97403-1285
Tel: 541/346-4680
Fax: 541/346-1243
E-Mail: bruceb@uoregon.edu
AB  - The large increase in direct foreign investment (DFI) into the United States in the late 1980s has generated considerable research on why these flows occurred and where these foreign firms located.  However, very little has been done to evaluate the impact these foreign firms have on the local communities in which they locate.  As a first step in addressing this topic, we use detailed county-level panel data from South Carolina across 5 year intervals from 1980 through 1995 to investigate the effect of foreign manufacturing firms on local labor markets and on the level and distribution of local government budgets.  We find that manufacturing employment by foreign firms has a substantial impact on industry wages and county budgets which is significantly different from domestic manufacturing employment. With respect to wages, we find that while increased manufacturing employment generally increases county wages in an average two-digit industry, this effect is more than seven times larger when the employment growth comes from a foreign firm, rather than a domestic one.  On the budget side, we find that foreign employment leads to larger declines in per capita revenues and expenditures at the county level, and to significant redistribution of county expenditures away from public school funding and toward transportation and public safety.
ER  -