ABSTRACT
The adverse effect on home labor was thought to occur through two main channels. One was the replacement of home production for the US market by imports from the affiliates and the other was the replacement of home production for export by affiliate production in the host countries. Since imports into the United States from manufacturing affiliates abroad were relatively small, most attention was focused on export replacement. However, a series of studies of export replacement failed to find evidence that it had taken place. Most studies, including parallel ones for Swedish firms, seemed to find that the net effect of affiliate production on parent exports was positive, if there was any effect at all. For the most part, these studies have found little or no effect or found that production abroad, on
Much of the concern over outward FDI arose from the impression that production and employment abroad had been rising rapidly. That was the case from the 1950s through the mid-1970s, but in the ten years after 1977, employment in foreign affiliates of US firms outside banking fell by almost a million. It has recovered since then, but did not reach the 1977 level again until 1995. Most of this decline took place in manufacturing affiliates, and the number of these employees was still below the 1977 level in 1995.
