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Multinational Companies, Backward Linkages and Labour Demand Elasticities

  • Görg, Holger

    ()

    (Kiel Institute for the World Economy)

  • Henry, Michael

    ()

    (Aston University)

  • Strobl, Eric

    ()

    (Ecole Polytechnique, Paris)

  • Walsh, Frank

    ()

    (University College Dublin)

This paper investigates the link between nationality of ownership and wage elasticities of labour demand at the level of the plant. In particular, we examine whether labour demand in multinationals becomes less elastic with respect to the wage if the plant has backward linkages with the local economy. Our empirical evidence, based on a rich plant level dataset, shows that the extent of local linkages indeed generally reduces the wage elasticity of labour demand. This result is economically important and holds for a number of different specifications.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2506.

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Length: 32 pages
Date of creation: Dec 2006
Date of revision:
Publication status: published in: Canadian Journal of Economics / Revue canadienne d'économique, 2009, 42( 1), 332-348
Handle: RePEc:iza:izadps:dp2506
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  1. Beata Smarzynska Javorcik, 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages," American Economic Review, American Economic Association, vol. 94(3), pages 605-627, June.
  2. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  3. Holger Görg & Frances Ruane, 2000. "An Analysis of Backward Linkages in the Irish Electronics Sector," The Economic and Social Review, Economic and Social Studies, vol. 31(3), pages 215-235.
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