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The Importance of Multinational Companies for Global Economic Linkages

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Author Info
W.J. Jansen
A.C.J. Stokman

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Abstract

We investigate to what extent the expansion of FDI and the internationalization of production can be related to the recent phenomenon of more synchronized business cycles. We first focus on the relationship between bilateral FDI positions and cross-country output correlations in the period 1982- 2001. We find that countries that have comparatively intensive FDI relations exhibit a greater degree of output comovement, and that this positive association seems to become stronger over time. We then present evidence that international rent sharing might be an important aspect of global economic linkages. German, French, Belgian and Dutch labour markets are significantly affected by profits of foreign-based multinationals, with employment being more sensitive than wages. By contrast, US and UK labour market conditions do not, or hardly, react to changes in foreign profitability.

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Paper provided by Netherlands Central Bank, Research Department in its series WO Research Memoranda (discontinued) with number 720.

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Date of creation: 2002
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Handle: RePEc:dnb:wormem:720

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Related research
Keywords: foreign direct investment; rent sharing; international linkages; spillovers;

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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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. W. Jos Jansen & Ad C.J. Stokman, 2004. "Foreign Direct Investment and International Business Cycle Comovement," Macroeconomics 0402029, EconWPA. [Downloadable!]
    Other versions:
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