Question

Explain How the U.S. firms doing Foreign Derect Investment abroad would cause job loss in the United States? How could it save jobs in the United States?

Answer 1

Increased competition with foreign countries forces firms to relocate their production sites overseas, which results in disemployment in the home country. One reason is that foreign direct investment (FDI) usually initiates increases in the production of final goods in foreign countries, which positively affects the production of intermediate inputs in the home country, resulting in the maintenance of, or an increase in, the demand for domestic labour. Such positive effects may offset or even exceed the negative effects.the wage differential between countries explained only a small proportion of the decline in US manufacturing employment. Other factors, such as falling investment goods prices and import competition, are a more important quantitative determinant.