This paper reviews some of the possible changes that may occur in the national labour markets of
many OECD countries as a result of international trade and the internationalisation of production by
multinational companies, with a particular focus on the impact of outward foreign direct investment (FDI)
from OECD countries on employment in the home country of the investing firms. Existing studies suggest
that the overall impact of trade and the internationalisation of production on aggregate labour market
outcomes has been comparatively small, although particular skill and occupational groups have been
affected more strongly. The empirical findings in the paper suggest that the aggregate employment impact
of outward FDI varies across industries and countries. For manufacturing industries with strong
commercial links with the non-OECD economies, there is evidence that domestic employment has become
more sensitive to movements in domestic labour costs. At the country level, the growth of outward
investment is found to have a significant positive effect on domestic employment growth in the United
States. In contrast, there is a negative association in Japan, especially from outward investment in China.
