International capital markets and domestic employment: Evidence from worldwide publicly listed large firms

Fangfang Hou, Elisabetta Magnani, Xinpeng Xu

Research output: Journal article publicationJournal articleAcademic researchpeer-review


We study how access to the international capital market affects domestic employment. Using a large firm-level panel data set that covers over 60 countries between 1982 and 2014, we find that access to the international capital market positively affects firm-level employment, and the magnitude of this impact is economically significant. This causal effect is identified through a generalised triple-differences identification strategy that exploits variations in both external financial dependence and the progress of capital account openness. We also show that there are substantial heterogeneous effects across countries and firms; the effect is more pronounced for firms in industries that depend more on external finance and those in countries with weaker employment protection legislation. In addition, financially constrained firms respond more positively to international capital market access. Overall, our findings suggest that a strategy of gradually opening international capital markets will support employment.

Original languageEnglish
Pages (from-to)220-250
Number of pages31
JournalWorld Economy
Issue number1
Publication statusPublished - Jan 2022


  • capital account liberalisation
  • Employment
  • employment protection legislation
  • external finance dependence
  • financial constraints

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

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