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The Effect of Multinational Firms' Operations on Their Domestic Employment

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  • Irving B. Kravis
  • Robert E. Lipsey

Abstract

Given the level of its production in the U.S., a firm that produces more abroad tends to have fewer employees in the U.S. and to pay slightly higher salaries and wages to them. The most likely explanation seems to be that the larger a firm's foreign production, the greater its ability to allocate the more labor-intensive and less skill-intensive portions of its activity to locations outside the United States. This relationship is stronger among manufacturing firms than among service industry firms, probably because services are less tradable than manufactured goods or components, and service industries may therefore be less able to break up the production process to take advantage of differences in factor prices.

Suggested Citation

  • Irving B. Kravis & Robert E. Lipsey, 1988. "The Effect of Multinational Firms' Operations on Their Domestic Employment," NBER Working Papers 2760, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2760
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    References listed on IDEAS

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    1. Courtney, William H & Leipziger, Danny M, 1975. "Multinational Corporations in LDCs: The Choice of Technology," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 37(4), pages 297-304, November.
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    3. Magnus Blomstrom & Robert E. Lipsey & Ksenia Kulchycky, 1988. "U.S. and Swedish Direct Investment and Exports," NBER Chapters, in: Trade Policy Issues and Empirical Analysis, pages 257-302, National Bureau of Economic Research, Inc.
    4. Lipsey, Robert E & Weiss, Merle Yahr, 1981. "Foreign Production and Exports in Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 63(4), pages 488-494, November.
    5. Robert E. Lipsey & Irving Kravis, 1982. "Do Multinational Firms Adapt Factor Proportions to Relative Factor Prices?," NBER Chapters, in: Trade and Employment in Developing Countries, Volume 2: Factor Supply and Substitution, pages 215-256, National Bureau of Economic Research, Inc.
    6. Robert E. Baldwin, 1988. "Trade Policy Issues and Empirical Analysis," NBER Books, National Bureau of Economic Research, Inc, number bald88-2, May.
    7. Lipsey, Robert E & Weiss, Merle Yahr, 1984. "Foreign Production and Exports of Individual Firms," The Review of Economics and Statistics, MIT Press, vol. 66(2), pages 304-308, May.
    8. Irving B. Kravis & Robert E. Lipsey, 1988. "Production and Trade in Services by U.S. Multinational Firms," NBER Working Papers 2615, National Bureau of Economic Research, Inc.
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