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Firm Dynamics and Employment Adjustment: Multinational vs Domestic Firms


  • Pierre BLANCHARD

    (Université de Paris-EST, ERUDITE)

  • Emmanuel DHYNE

    (National Bank of Belgium, Research Department)

  • Catherine FUSS

    (National Bank of Belgium, Research Department)

  • Claude MATHIEU

    (Université de Paris-Est, ERUDITE)


The economic and financial crisis has led to sizable employment losses resulting from different adjustment mechanisms in domestic and multinational firms. This may be due to either production plant closures or downsizing by those 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 both plant location and employment adjustment. However, before the crisis, foreign multinationals created more jobs on average than other types of firms.

Suggested Citation

  • Pierre BLANCHARD & Emmanuel DHYNE & Catherine FUSS & Claude MATHIEU, 2013. "Firm Dynamics and Employment Adjustment: Multinational vs Domestic Firms," Discussion Papers (REL - Recherches Economiques de Louvain) 2013013, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvre:2013013

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    More about this item


    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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