infonet-economy

This paper analyses the potential employment effects of foreign direct investment in the Swiss services industry. First, the theoretical analysis considers the consequences on domestic employment resulting from the specific characteristics of services compared with those of industrial goods. It is demonstrated that conventional research in this field systematically ignores important factors which influence domestic employment. We point out that, not only the degree of tradability of services, but also the mobility of consumers and producers, as well as the motives underlying the decisions for foreign investment have a crucial influence on the consequences to be expected for the domestic labour market. Second, an initial attempt is undertaken to empirically test our theoretical framework. It is shown for the Swiss tourism industry that the obtained results are to a large extent consistent with the theoretical predictions.