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Firm Dynamics and Employment Adjustment: Multinational vs Domestic Firms

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Listed:
  • Pierre Blanchard
  • Emmanuel Dhyne
  • Catherine Fuss
  • Claude Mathieu

Abstract

The economic and financial crisis has meant sizeable employment losses that resulted from different adjustment mechanisms in domestic firms and multinational companies. This may be due to either production plant closures or downsizing by firms that remain active. This paper evaluates the importance of both phenomena for multinational and domestic firms in Belgium over the period preceding the crisis (1997-2008), using a firm-level dataset. Our results reveal that multinational enterprises tend to leave the local market more frequently than domestic firms with comparable firm and sector characteristics. Further, multinational incumbents face employment adjustment costs for white-collar workers that are around half of those borne by domestic firms. In sum, our findings suggest that multinational firms are more flexible in terms of plant location as well as in terms of employment adjustment. However, before the crisis, foreign multinationals created more jobs on average than other types of firms. JEL Classification: F23, J23.

Suggested Citation

  • Pierre Blanchard & Emmanuel Dhyne & Catherine Fuss & Claude Mathieu, 2013. "Firm Dynamics and Employment Adjustment: Multinational vs Domestic Firms," Recherches économiques de Louvain, De Boeck Université, vol. 79(1), pages 59-81.
  • Handle: RePEc:cai:reldbu:rel_791_0059
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    Keywords

    multinational firms; labour adjustment costs; firm exit;

    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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