FDI and Trade: The Irish Host‐Country Experience

Abstract

In Irish manufacturing, the foreign sector accounts for about one half of employment and some  % of gross output. The Irish experience therefore provides us with a textbook case study of the effects on an EU host economy of export-oriented FDI. We explore in this paper the structural changes induced by FDI and the effects of FDI on the determinants of growth in Ireland. We also consider some possible adverse effects that may be associated with such strong reliance on multinational investment.

Multinationals and regional indigenous development

“…For a review of Irish regional industrial policy see Meyler and Strobl (2000). shares are owned by foreign shareholders. While arguably, firms with lower foreign ownership should possibly still be considered foreign owned, this is not necessarily a problem for the case of Ireland since almost all foreign direct investment in Ireland has been greenfield investment rather than acquisition of local firms; see Barry and Bradley (1997). In terms of the regional location of plants we chose to use a classification system based mainly on administrative criteria, namely the county.…”

“…The idea is that such linkages occur within broad industry classifications since firms mainly use intermediates from other firms in related industries. In the Irish case, evidence presented by Barry and Bradley (1997) suggests in fact that backward linkages are the most important channel for spillovers from multinationals since domestic firms generally provide part of the intermediates to multinationals located in Ireland. We thus also experimented with a measure that encompasses not only intra-sectoral but also inter-sectoral catalyst effects (although limited to those that occur within the same broader sectoral category).…”

“…In doing so, we focus on both spillovers arising from multinationals located within the same county as well as neighbouring counties. Given the importance of foreign direct investment in Ireland, it arguably provides an ideal case study for such analysis as it is now common to attribute Ireland's economic growth and image as the 'Celtic Tiger' to its success in attracting vast amounts of foreign direct investment that is likely to have also stimulated domestic industry (see for instance, Barry and Bradley 1997). Moreover, Irish industrial policymakers put considerable effort into attracting multinationals into new, i.e., previously non-existent industries, in order to 'jump-start' local production in these sectors.…”

The Celtic Tiger and home leaving among Irish young adults

“…Many of the jobs in foreign MNCs are high skilled compared to the domestic sector (Barrett et al 2002;Barry 2005). During the period the average wage in foreign industry was 25 % higher and the share of technical and administrative jobs was 5 percentage points higher in foreign than that in indigenous industry (Barry and Bradley 1997). In discussing the demand for high skilled labor in the 1990s, Barrett et al (2002) argue that ''the most rapid increase in the demand for skilled labour .…”

Trade Verticality and Structural Change in Industries:The Cases of Taiwan and South Korea

“…1 In earlier 1990s and the decade during which increased globalization and liberalization in trade and investment became prominently important issues in world trade, economists looked at trade issues from the prospective of vertical specialization, outsourcing, or foreign direct investment. The prominent studies include, among others, Krugman (1995), Barry and Bradley (1997), Yeats (1998), Hummels et al (2001), Görg (2000), Deardorff (2001), Arndt and Kierzkowski (2001), Egger and Egger (2002), and Yi (2003).…”