U.S. Multinational Services Companies: Effects of Foreign Affiliate Activity on U.S. Employment

Abstract

This working paper examines the effect that U.S. services firms’ establishment abroad has on domestic employment. Whereas many papers have explored the employment effects of foreign direct investment in manufacturing, few have explored the effects of services investment. We find that services multinationals’ activities abroad increase U.S. employment by promoting intrafirm exports from parent firms to their foreign affiliates. These exports support jobs at the parents’ headquarters and throughout their U.S. supply chains. Our findings are principally based on economic research and econometric analysis performed by Commission staff, services trade and investment data published by the Bureau of Economic Analysis, and employment data collected by the Bureau of Labor Statistics. In the aggregate, we find that services activities abroad support nearly 700,000 U.S. jobs. Case studies of U.S. multinationals in the banking, computer, logistics, and retail industries provide the global dimensions of U.S. MNC operations and identify domestic employment effects associated with foreign affiliate activity in each industry.ITC_Multinational_Services_Companies.pdf: 980 downloads, before Oct. 1, 2020