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Adjusting Labour Demand: Multinational versus National Firms- A Cross-European Analysis

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Author Info
Barba Navaretti, Giorgio
Checchi, Daniele
Turrini, Alessandro Antonio

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Abstract

This Paper provides a cross-country perspective to the firm-level analysis of the relation between foreign ownership and labour demand. We estimate labour demand equations in 11 European countries using dynamic panel data techniques on samples that permit to distinguish the ownership status of firms. We find that the employment adjustment is significantly faster in MNEs’ affiliates, irrespective of the country investigated. As for the wage elasticity of labour demand, MNEs show smaller elasticities compared with national firms, and very little variation across countries. Cross-country correlations show that the relative value of wage elasticities in MNEs on that in NEs is positively related to country-level indexes of labour market regulation (employment protection, union presence,...). We interpret the results as follows: MNEs tend to have a more rigid demand for total labour (possibly due to a different skill composition). MNEs being relatively ‘footloose’, however, this difference tends to vanish as the rigidity of employment regulations rises.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3751.

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Date of creation: Feb 2003
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Handle: RePEc:cpr:ceprdp:3751

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Keywords: employment adjustment costs labour demand elasticity multinational firms

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Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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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. Q Li & S Girma, . "Exporting, FDI, and Labour Demand Adjustment: Evidence from the UK Manufacturing," Working Papers 2006_18, Department of Economics, University of Glasgow. [Downloadable!]
  2. Donata Bessey & Uschi Backes-Gellner, 2007. "Premature Apprenticeship Terminations: An Economic Analysis," Economics of Education Working Paper Series 0002, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
  3. Jozef Konings & Alan Patrick Murphy, 2003. "Do Multinational Enterprises Relocate Employment to Low Wage Regions? Evidence from European Multinationals," LICOS Discussion Papers 13103, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
  4. Kozo Kiyota & Toshiyuki Matsuura, 2006. "Employment of MNEs in Japan: New Evidence," Discussion papers 06014, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
  5. Buch, Claudia M. & Lipponer, Alexander, 2007. "Volatile multinationals? Evidence from the labor demand of German firms," Discussion Paper Series 1: Economic Studies 2007,22, Deutsche Bundesbank, Research Centre. [Downloadable!]
  6. Buch, Claudia M. & Döpke, Jörg & Strotmann, Harald, 2006. "Does trade openness increase firm-level volatility?," Discussion Paper Series 1: Economic Studies 2006,40, Deutsche Bundesbank, Research Centre. [Downloadable!]
  7. Jim Malley & Apostolis Philippopoulos & Ulrich Woitek, . "To React or Not? Fiscal Policy, Volatility and Welfare in the EU-3," Working Papers 2007_02, Department of Economics, University of Glasgow. [Downloadable!]
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