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Margins of Multinational Labor Substitution

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Author Info
Marc-Andreas Muendler () (University of California, San Diego and CESifo)
Sascha O. Becker () (University of Munich, CESifo and IZA Bonn)

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Abstract

Multinational labor demand responds to wage differentials at the extensive margin, when a multinational enterprise (MNE) expands into foreign locations, and at the intensive margin, when an MNE operates existing affiliates across locations. We derive conditions for parametric and nonparametric identification of an MNE model to infer elasticities of labor substitution at both margins, controlling for location selectivity. Prior studies have rarely found foreign wages or operations to affect employment. Our strategy detects salient adjustments at the extensive margin for German MNEs. With every percentage increase in German wages, German MNEs allocate 2,000 manufacturing jobs to Eastern Europe at the extensive margin and 4,000 jobs overall.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2131.

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Length: 52 pages
Date of creation: May 2006
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Handle: RePEc:iza:izadps:dp2131

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Related research
Keywords: multinational enterprise; location choice; sample selectivity; labor demand; translog cost function; nonparametric estimation;

Other versions of this item:

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
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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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. Sascha O. Becker & Marc Andreas Muendler, 2006. "The Effect of FDI on Job Separation," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  2. Marc-Andreas Muendler & Sascha Becker, 2006. "Margins of Multinational Labor Substitution," University of California at San Diego, Economics Working Paper Series 2006-04R, Department of Economics, UC San Diego. [Downloadable!]
    Other versions:
  3. Rosario Crinò, 2009. "Service Offshoring and White-Collar Employment," UFAE and IAE Working Papers 775.09, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
    Other versions:
  4. Harrison, Ann E. & McMillan, Margaret S., 2006. "Dispelling Some Myths About Offshoring," MPRA Paper 15615, University Library of Munich, Germany. [Downloadable!]
  5. repec:bep:eapadv:v:8:y:2008:i:1:p:1770-1770 is not listed on IDEAS
  6. Ann E. Harrison & Margaret S. McMillan, 2006. "Outsourcing Jobs? Multinationals and US Employment," NBER Working Papers 12372, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Robert E. Lipsey, 2006. "Measuring the Impacts of FDI in Central and Eastern Europe," NBER Working Papers 12808, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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