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

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Author Info
Sascha O. Becker ()
Karolina Ekholm
Robert Jäckle ()
Marc-Andreas Muendler

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Abstract

Using data on German and Swedish multinational enterprises (MNEs), this paper analyzes determinants of international location choice and the degree of substitutability of labor across locations. Countries with highly skilled labor forces strongly attract German but not necessarily Swedish MNEs. 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 associated with 900 fewer jobs at German parents and 5,000 more jobs at affiliates in CEE. A one percent larger wage gap between Sweden and CEE is associated with 140 fewer jobs at Swedish parents and 260 more jobs at affiliates in CEE.

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Publisher Info
Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Paper No. 4.

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Date of creation: 2005
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Handle: RePEc:ces:ifowps:_4

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Related research
Keywords: Multinational enterprises location choice multinomial choice labor demand translog cost function

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Find related papers by 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

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Brainard, S Lael, 1997. "An Empirical Assessment of the Proximity-Concentration Trade-off between Multinational Sales and Trade," American Economic Review, American Economic Association, vol. 87(4), pages 520-44, September. [Downloadable!] (restricted)
  2. Ekholm, Karolina & Forslid, Rikard, 2001. " Trade and Location with Horizontal and Vertical Multi-region Firms," Scandinavian Journal of Economics, Blackwell Publishing, vol. 103(1), pages 101-18, March. [Downloadable!] (restricted)
    Other versions:
  3. 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.
    Other versions:
  4. Shatz, Howard J. & Venables, Anthony J., 2000. "The geography of international investment," Policy Research Working Paper Series 2338, The World Bank. [Downloadable!]
  5. Anderson, Richard G & Thursby, Jerry G, 1986. "Confidence Intervals for Elasticity Estimators in Translog Models," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 647-56, November. [Downloadable!] (restricted)
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  7. Head, Keith & Ries, John, 2002. "Offshore production and skill upgrading by Japanese manufacturing firms," Journal of International Economics, Elsevier, vol. 58(1), pages 81-105, October. [Downloadable!] (restricted)
  8. Braconier, Henrik & Ekholm, Karolina, 2000. "Swedish Multinationals and Competition from High- and Low-Wage Locations," Review of International Economics, Blackwell Publishing, vol. 8(3), pages 448-61, August. [Downloadable!] (restricted)
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  9. Becker, Sascha O. & Ekholm, Karolina & Jäckle, Robert & Muendler, Marc-Andreas, 2005. "Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals," CEPR Discussion Papers 4887, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  10. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Investment in the European Union," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 959-972, 01. [Downloadable!] (restricted)
    Other versions:
  11. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany. [Downloadable!]
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  12. David L. Carr & James R. Markusen & Keith E. Maskus, 2001. "Estimating the Knowledge-Capital Model of the Multinational Enterprise," American Economic Review, American Economic Association, vol. 91(3), pages 693-708, June. [Downloadable!] (restricted)
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  13. Konings, Jozef & Murphy, Alan, 2001. "Do Multinational Enterprises Substitute Parent Jobs for Foreign Ones? Evidence from European Firm Level Panel Data," CEPR Discussion Papers 2972, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  14. Claudia M. Buch & Jörn Kleinert & Alexander Lipponer & Farid Toubal, 2005. "Determinants and effects of foreign direct investment: evidence from German firm-level data," Economic Policy, CEPR, CES, MSH, vol. 20(41), pages 52-110, 01. [Downloadable!] (restricted)
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  16. Barba Navaretti, Giorgio & Castellani, Davide, 2004. "Investments Abroad and Performance at Home: Evidence from Italian Multinationals," CEPR Discussion Papers 4284, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  19. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February. [Downloadable!] (restricted)
  20. Burgess, David F, 1974. "A Cost Minimization Approach to Import Demand Equations," The Review of Economics and Statistics, MIT Press, vol. 56(2), pages 225-34, May. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marc-Andreas Muendler, 2006. "Margins of Multinational Labor Substitution," University of California at San Diego, Economics Working Paper Series 2006-04, Department of Economics, UC San Diego. [Downloadable!]
    Other versions:
  2. Frederick L. Joutz & Stephan Danninger, 2007. "What Explains Germany's Rebounding Export Market Share?," IMF Working Papers 07/24, International Monetary Fund. [Downloadable!]
    Other versions:
  3. Claudia M. Buch & Jörn Kleinert, 2006. "Who Goes East? The Impact of Enlargement on the Patterns of German FDI," IAW Discussion Papers 24, Institut für Angewandte Wirtschaftsforschung (IAW). [Downloadable!]
  4. Simona Rasciute & Eric J. Pentecost & Helena I. Marques, 2007. "An Empirical Investigation of the Determinants of the Location of Foreign Direct Investment in the Central and Eastern European Countries Using Multilevel Data," Discussion Paper Series 2007_22, Department of Economics, Loughborough University, revised Sep 2007. [Downloadable!]
  5. Özlem Onaran, 2008. "The effect of foreign affiliate employment on wages, employment, and the wage share in Austria," Department of Economics Working Papers wuwp118, Vienna University of Economics and B.A., Department of Economics. [Downloadable!]
  6. Elena Biewen, 2007. "Within-Schätzung bei anonymisierten Paneldaten," IAW Discussion Papers 34, Institut für Angewandte Wirtschaftsforschung (IAW). [Downloadable!]
  7. Stefano Federico & Gaetano Alfredo Minerva, 2008. "Outward FDI and Local Employment Growth in Italy," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 144(2), pages 295-324, April. [Downloadable!] (restricted)
    Other versions:
  8. Fuest, Clemens & Hemmelgarn, Thomas & Ramb, Fred, 2006. "How would formula apportionment in the EU affect the distribution and the size of the corporate tax base? An analysis based on German multinationals," Discussion Paper Series 1: Economic Studies 2006,20, Deutsche Bundesbank, Research Centre. [Downloadable!]
  9. Peter Egger & Doina Maria Radulescu, 2008. "Labour Taxation and Foreign Direct Investment," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  10. Sascha O. Becker & Karolina Ekholm & Robert Jäckle & Marc-Andreas Muendler, 2005. "Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 141(4), pages 693-731, December. [Downloadable!] (restricted)
    Other versions:
  11. Michael Hübler, 2007. "A Simple Model of Outsourcing with Cournot Competition," Kiel Working Papers 1320, Kiel Institute for the World Economy. [Downloadable!]
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