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

Author

Listed:
  • Sascha Becker
  • Karolina Ekholm
  • Robert Jaeckle
  • Marc-Andreas Muendler
  • Sascha O. Becker

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. On 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.

Suggested Citation

  • Sascha Becker & Karolina Ekholm & Robert Jaeckle & Marc-Andreas Muendler & Sascha O. Becker, 2005. "Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals," CESifo Working Paper Series 1374, CESifo.
    • Handle: RePEc:ces:ceswps:_1374
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    References listed on IDEAS

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    More about this item

    Keywords

    multinational enterprises; location choice; multinomial choice; labor demand; translog cost function;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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