1 Investment abroad and adjustment at home: evidence from UK multinational firms

Abstract: I use within-firm, plant-level data combined with information on firms ’ geographic overseas investment portfolio to examine how investment in low-wage economies affects firms’ home-country operations. To remain close to theory I focus on changes in firms ’ organisational and industrial structure driven by plant closures. As predicted by models of vertical multinationals I find that investment in relatively low-wage economies is associated with plant closures in relatively low-skill, low-wage industries in the UK. The findings are of interest in the context of the relaxation of barriers to inward investment in low-wage economies, such as associated with China’s accession to the WTO