Inward FDI and host country labour markets. Evidence from the Italian manufacturing system

Countries are increasingly competing to attract inward FDIs because of the potential benefits they bring about. In advanced economies, a specialised, skilled workforce is a pivotal economic development asset to enhance local and regional innovation capabilities. Within this framework, the paper aims at investigating how the use of a local, skilled workforce differs according to firms’ ownership; being either affiliates of foreign MNEs, or uni-national firms (firms that have neither been acquired in the period of analysis, nor have invested abroad; henceforth NATs). We empirically investigate this issue by adopting a novel database merging economic data on inward FDIs and NATs operating in the manufacturing sector in the Veneto region (northeast of Italy) between 2007 and 2013. Descriptive statistics and econometric analysis (counterfactual estimation) have been developed, devoting particular attention to the firms’ skill composition (in terms of skill level, age, gender and nationality). The results show that the two groups of firms differ in terms of workforce skill composition, and the affiliates of foreign MNEs positively impact on the regeneration of the host country’s human capital by attracting and employing a wider share of a more highly skilled labour force than NATs.