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Foreign Direct Investment in Central and Eastern Europe: Employment Effects in the EU

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Author Info

  • Henrik Braconier

    (IUI, Stockholm)

  • Karolina Ekholm

    (Stockholm School of Economics; CEPR)

Abstract

We use firm-level data on Swedish multinationals to analyze how the recent expansion of affiliate employment in Central and Eastern Europe (CEE) has affected affiliate employment elsewhere. According to our results, employment in affiliates located in other low-wage countries in Europe decreased substantially as a consequence of the expansion in CEE. Furthermore, affiliate activities in these countries have become more sensitive to changes in labor costs as firms have set up production in CEE. We find that employment in Sweden and other high-wage European countries has also been affected, but these effects seem to be much smaller.

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File URL: http://www.dagliano.unimi.it/media/WP2002_161.pdf
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Bibliographic Info

Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 161.

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Date of creation: 01 May 2002
Date of revision:
Handle: RePEc:csl:devewp:161

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Keywords: Foreign Direct Investment; multinational enterprises; Central and Eastern Europe;

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References

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  1. Markusen, James R & Maskus, Keith E, 2002. "Discriminating among Alternative Theories of the Multinational Enterprise," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 694-707, November.
  2. 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.
  3. Matthew J. Slaughter, 1995. "Multinational Corporations, Outsourcing, and American Wage Divergence," NBER Working Papers 5253, National Bureau of Economic Research, Inc.
  4. Markusen, James R. & Venables, Anthony J., 1998. "Multinational firms and the new trade theory," Journal of International Economics, Elsevier, vol. 46(2), pages 183-203, December.
  5. Braconier, Henrik & Ekholm, Karolina, 1999. "Swedish Multinationals and Competition from High- and Low-Wage Locations," CEPR Discussion Papers 2323, C.E.P.R. Discussion Papers.
  6. World Bank, 2000. "World Development Indicators 2000," World Bank Publications, The World Bank, number 13828, October.
  7. Markusen, James R. & Venables, Anthony J., 2000. "The theory of endowment, intra-industry and multi-national trade," Journal of International Economics, Elsevier, vol. 52(2), pages 209-234, December.
  8. Hatzius, Jan, 2000. "Foreign direct investment and factor demand elasticities," European Economic Review, Elsevier, vol. 44(1), pages 117-143, January.
  9. David A. Riker & S. Lael Brainard, 1997. "U.S. Multinationals and Competition from Low Wage Countries," NBER Working Papers 5959, National Bureau of Economic Research, Inc.
  10. Venables, Anthony J., 1999. "Fragmentation and multinational production," European Economic Review, Elsevier, vol. 43(4-6), pages 935-945, April.
  11. Shatz, Howard J. & Venables, Anthony J., 2000. "The geography of international investment," Policy Research Working Paper Series 2338, The World Bank.
  12. James R. Markusen, 1997. "Trade versus Investment Liberalization," NBER Working Papers 6231, National Bureau of Economic Research, Inc.
  13. Ignatius J. Horstmann & James R. Markusen, 1990. "Endogenous Market Structures in International Trade," NBER Working Papers 3283, National Bureau of Economic Research, Inc.
  14. Kimberly A. Clausing, 1998. "The Impact of Transfer Pricing on Intrafirm Trade," NBER Working Papers 6688, National Bureau of Economic Research, Inc.
  15. Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
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Citations

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Cited by:
  1. Jaan Masso & Urmas Varblane & Priit Vahter, 2007. "The Impact Of Outward Fdi On Home-Country Employment In A Low-Cost Transition Economy," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 52, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  2. Frank Barry & Aoife Hannan, 2002. "Product Characteristics and the Growth of FDI," Working Papers 200217, School Of Economics, University College Dublin.
  3. Sandrine Levasseur, 2002. "Investissements directs à l’étranger et stratégies des entreprises multinationales," Sciences Po publications info:hdl:2441/3381, Sciences Po.
  4. Karolina Ekholm & Rikard Forslid & James Markusen, 2003. "Export-Platform Foreign Direct Investment," NBER Working Papers 9517, National Bureau of Economic Research, Inc.
  5. Sandrine Levasseur, 2006. "Convergence and FDI in an enlarged EU: what can we learn from the experience of cohesion countries for the CEECS?," Documents de Travail de l'OFCE 2006-12, Observatoire Francais des Conjonctures Economiques (OFCE).
  6. Nuno Crespo & Maria Paula Fontoura & Frank Barry, 2004. "EU Enlargement and the Portuguese Economy," The World Economy, Wiley Blackwell, vol. 27(6), pages 781-802, 06.
  7. Barry, Frank, 2002. "FDI, Infrastructure and the Welfare Effects of Labour Migration," CEPR Discussion Papers 3380, C.E.P.R. Discussion Papers.
  8. Frank Barry & Aoife Hannan, 2003. "Product Characteristics and the Growth of FDI," Working Papers 200308, School Of Economics, University College Dublin.
  9. Huiqun Liu & Jinyong Lu, 2011. "The home-employment effect of FDI from developing countries: in the case of China," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 4(3), pages 173-182, October.
  10. Barry, Frank & Walsh, Frank, 2008. "Gains and losses from sectoral relocation: A review of theory and empirics," Structural Change and Economic Dynamics, Elsevier, vol. 19(1), pages 4-16, March.
  11. Fritz Breuss, 2002. "Benefits and Dangers of EU Enlargement," Empirica, Springer, vol. 29(3), pages 245-274, September.
  12. Zhao, Wei & Liu, Ling & Zhao, Ting, 2010. "The contribution of outward direct investment to productivity changes within China, 1991-2007," Journal of International Management, Elsevier, vol. 16(2), pages 121-130, June.
  13. repec:spo:wpecon:info:hdl:2441/3381 is not listed on IDEAS
  14. Lars Calmfors & Giancarlo Corsetti & John Kay & Seppo Honkapohja & Willi Leibfritz & Gilles Saint-Paul & Hans-Werner Sinn & Xavier Vives, 2005. "Chapter 2: Outsourcing," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 39-50, 03.
  15. André Cartapanis & Audrey Koulinsky & Nadine Richez-Battesti, 2006. "L'hétérogénéité sociale de l'Union européenne après l'élargissement et la question des délocalisations," Revue économique, Presses de Sciences-Po, vol. 57(4), pages 793-822.

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