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Labour Market Regulation and Foreign Direct Investment: US multinationals in Germany and the UK

Author

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  • Kerstin Pull

    (Institute for Labour Law and Industrial Relations in the EC, University of Trier)

Abstract

At a time of intensifying uncertainty, managerial flexibility to adapt to changes in the economic environment is increasingly important. Different business loca-tions, it is frequently argued, offer this flexibility to differing degrees, and labour market regulations are held to be one essential factor in determining the resulting attractiveness of a country as a business location. This paper takes an options perspective in order to grasp the potential effect of labour market regulations on location decisions. The option value of an investment, it is argued, is influenced, among other factors, by labour market regulations. Depending on their prefer-ence for certain options, different investors will prefer different labour market settings. The ability of the options perspective to assess the role of labour market regulations for the attractiveness of international business locations is exempli-fied by a British-German comparison and then confronted with secondary data as well as with a unique data set derived from a survey of US multinationals in the UK and Germany.

Suggested Citation

  • Kerstin Pull, 2002. "Labour Market Regulation and Foreign Direct Investment: US multinationals in Germany and the UK," IAAEG Discussion Papers until 2011 200204, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
  • Handle: RePEc:iaa:wpaper:200204
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    References listed on IDEAS

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    1. Valerie Jarvis & S. J. Prais, 1997. "The Quality of Manufactured Products in Britain and Germany," International Review of Applied Economics, Taylor & Francis Journals, vol. 11(3), pages 421-438.
    2. Thomas J. Holmes, 1998. "The Effect of State Policies on the Location of Manufacturing: Evidence from State Borders," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 667-705, August.
    3. Bell, David N.F. & Hart, Robert A. & Hübler, Olaf & Schwerdt, Wolfgang, 2000. "Paid and Unpaid Overtime Working in Germany and the UK," IZA Discussion Papers 133, Institute for the Study of Labor (IZA).
    4. Justus Haucap & Christian Wey & Jens F. Barmbold, 1997. "Location Choice as a Signal for Product Quality: The Economics of 'Made in Germany'," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 153(3), pages 510-510, September.
    5. Christel Lane, 1988. "Industrial Change in Europe: The Pursuit of Flexible Specialisation in Britain and West Germany," Work, Employment & Society, British Sociological Association, vol. 2(2), pages 141-168, June.
    6. repec:sae:niesru:v:139:y::i:1:p:79-87 is not listed on IDEAS
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    Cited by:

    1. repec:ces:ifodic:v:1:y:2003:i:2:p:14567964 is not listed on IDEAS
    2. Ronald Schettkat, 2003. "Institutions in the Economic Fitness Landscape: What Impact Do Welfare State Institutions Have on Economic Performance?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(2), pages 27-33, October.

    More about this item

    Keywords

    labour market regulation; location decision; option value of flexibility;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence

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