This paper shows that the liberalisation of foreign direct investment (FDI) tends to make the effect of labour costs on domestic investment and labour demand more negative. Using data from Germany, it then provides evidence that is consistent with this view. First, high unit labour costs...

A production-based asset pricing model is developed in which growth is sustained through investment in human capital, which itself obsolesces over time. The model is used to examine the effects on the business cycle properties of asset returns fo decisions to invest in physical capital when the...