| This paper investigates the relationship between domestic employment and the real wage, added value production index, foreign sales by the companies, the investing country's real gross domestic product, the corporation's production, and exchange rates using the data on the Japanese manufacturing sector and Japanese macroeconomic data from the first quarter of 1997 to the fourth quarter of 2011. The paper concludes that domestic labor demand will decrease as Japanese firms increase their overseas operations, and that employment will increase when the companies increase their home production and export of higher added-value products. My results suggest that government can counteract effects of the expansion of foreign direct investment by encouraging companies to focus on producing higher value-added goods and services at home. While companies' expansion of overseas operations is critical for them to be competitive in foreign and domestic markets, to support overall welfare investing countries need to produce and nurture new businesses. Otherwise, people in those countries will lose jobs, which could ultimately harm the economy of the country. |
