Many allege multinationals are exporting' U.S. jobs when they expand operations abroad. This paper investigates the extent to which expansion of offshore production by U.S. multinationals reduces labor demand at home and at other offshore locations, using a panel on U.S. multinationals and their foreign affiliates between 1983 and 1992. The results suggest that foreign affiliate employment substitutes modestly at the margins for U.S. parent employment. There is much stronger substitution between workers at affiliates in alternative low wage locations. In contrast, activities performed by affiliates at locations with different workforce skill levels in the same region appear to be complements. The results suggest a vertical division of activities among countries with different workforce skill levels, where workers in developing countries compete with each other to perform the activities most sensitive to labor costs. When wages in developing countries, such as Mexico, fall 10 percent, U.S. parent employment falls 0.17 percent, while affiliates in other developing countries, such as Malaysia, lay off 1.6 percent of their workforce.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
5958.
Length: Date of creation: Mar 1997 Date of revision: Handle: RePEc:nbr:nberwo:5958
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Find related papers by JEL classification: J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
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