Abstract
This paper investigates the eects of multinational corporations on labor standards. We argue that the previous literature has failed to distinguish the dierent motives that encourage rms to become multinational. Therefore, we build a stylized model of segmented labor markets with equilibrium unemployment where parts of the labor force are willing to accept reductions in their labor standards to attract job-creating horizontal foreign direct investment. By disentangling US FDI data for 34 advanced host countries throughout the period 1997 to 2002 into vertically and horizontally motivated FDI, we show that this disaggregation provides much more signicant results. Concretely, we
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