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Location Choices and Employment Decisions: A Comparison of German and Swedish Multinationals

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  • Becker, Sasha O
  • Ekholm, Karolina
  • Jackle, Robert
  • Muendler, Marc-Andreas

Abstract

Using data for German and Swedish multinational enterprises (MNEs), this paper assesses international employment patterns. It analyzes determinants of location choice and the degree of substitutability of labor across locations. Countries with highly skilled labor forces attract German MNEs, but we find no such evidence for Swedish MNEs. This is consistent with the hypothesis that German MNEs locate production stages intensive in high-skilled labor abroad. In MNEs from either country, affiliate employment tends to substitute for employment at the parent firm. At the margin, substitutability is the strongest with respect to affiliate employment in Western Europe. A one percent larger wage gap between Germany and locations in Central and Eastern Europe (CEE) is estimated to be associated with 900 fewer jobs in German parents and 5,000 more jobs in affiliates located in CEE. A one percent larger wage gap between Sweden and CEE is estimated to be associated with 140 fewer jobs in Swedish parents and 260 more jobs in affiliates located in CEE.

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Bibliographic Info

Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number qt2fq490pd.

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Date of creation: 01 Dec 2004
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Handle: RePEc:cdl:ucsdec:qt2fq490pd

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Keywords: Multinational enterprises; location choices; multinomial choice; labor demand; translog cost function;

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  1. Blomström, Magnus & Fors, Gunnar & Lipsey, Robert E., 1997. "Foreign Direct Investment and Employment: Home Country Experience in the United States and Sweden," Working Paper Series 490, Research Institute of Industrial Economics.
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  4. Becker, Sascha O. & Ekholm, Karolina & Jäckle, Robert & Mündler, Marc-Andreas, 2005. "Location choice and employment decisions: a comparison of German and Swedish multinationals," Discussion Paper Series 1: Economic Studies 2005,08, Deutsche Bundesbank, Research Centre.
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