Adjusting Labour Demand: Multinationals vs. National Firms: A Cross-European Analysis
AbstractThis 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 eleven 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. Crosscountry 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). However, being MNEs relatively “footloose”, this difference tends to vanish as the rigidity of employment regulations rises.
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Bibliographic InfoPaper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 168.
Date of creation: 01 Nov 2002
Date of revision:
Multinational firms; labour demand elasticity; employment adjustment costs;
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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