7 examined in much of the previous research on globalization and economic insecurity,and its empirical importance remains an open question.Another example is that theoretically, international trade in final goods-whether mediated by multinationals or not-could also affect insecurity by making labor demands more elastic through the scale effect.This pro-competitive effect of trade has been well-studied,and FDI can also work on the scale effect(e.g.,as foreign firms compete with domestic incumbents). We have focused on the substitution effect of FDI for several reasons.Most importantly,the substitution effect is direct in that it places domestic workers in competition with foreign labor for employment within the same firm.It is thus likely to have a larger effect on labor demand elasticities.2 Further,other researchers have emphasized in theory its possible role in generating insecurity(e.g.,Rodrik,1997),but no compelling empirical evidence has been produced. 2 There are several recent empirical studies documenting that MNEs and FDI do increase labor- demand elasticities through the substitution effect.Slaughter(2001)estimates that demand for U.S.production labor in manufacturing became more elastic from 1960 to the early 1990s,and that these increases were correlated with FDI outflows by U.S.-headquartered MNEs.Fabbri, Haskel,and Slaughter (2003)estimate that both U.K.-multinational plants and foreign-owned plants each had larger increases than did U.K.domestic plants in the elasticity of demand for production labor in manufacturing over 1973-1992.An important margin on which MNEs may affect elasticities is on the extensive margin of plant shutdowns.MNEs may be more likely than domestic firms to respond to shocks by closing entire plants.For the manufacturing sectors in at least three countries it has now been shown that plants that are part of an MNE are more likely to close than are their purely domestic counterparts:the United Kingdom(Fabbri,et al 2003);the United States(Bernard and Jensen 2002);and Ireland (Gorg and Strobl 2003).7 examined in much of the previous research on globalization and economic insecurity, and its empirical importance remains an open question. Another example is that theoretically, international trade in final goods—whether mediated by multinationals or not—could also affect insecurity by making labor demands more elastic through the scale effect. This pro-competitive effect of trade has been well-studied, and FDI can also work on the scale effect (e.g., as foreign firms compete with domestic incumbents). We have focused on the substitution effect of FDI for several reasons. Most importantly, the substitution effect is direct in that it places domestic workers in competition with foreign labor for employment within the same firm. It is thus likely to have a larger effect on labor demand elasticities.2 Further, other researchers have emphasized in theory its possible role in generating insecurity (e.g., Rodrik, 1997), but no compelling empirical evidence has been produced. 2 There are several recent empirical studies documenting that MNEs and FDI do increase labor￾demand elasticities through the substitution effect. Slaughter (2001) estimates that demand for U.S. production labor in manufacturing became more elastic from 1960 to the early 1990s, and that these increases were correlated with FDI outflows by U.S.-headquartered MNEs. Fabbri, Haskel, and Slaughter (2003) estimate that both U.K.-multinational plants and foreign-owned plants each had larger increases than did U.K. domestic plants in the elasticity of demand for production labor in manufacturing over 1973-1992. An important margin on which MNEs may affect elasticities is on the extensive margin of plant shutdowns. MNEs may be more likely than domestic firms to respond to shocks by closing entire plants. For the manufacturing sectors in at least three countries it has now been shown that plants that are part of an MNE are more likely to close than are their purely domestic counterparts: the United Kingdom (Fabbri, et al 2003); the United States (Bernard and Jensen 2002); and Ireland (Gorg and Strobl 2003)