Kiel Working Papers, Kiel Institute for World Economics
No 1243:
Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals
Sascha O. Becker, Karolina Ekholm, Robert Jäckle and Marc-Andreas Mündler
Abstract: Using data for German and Swedish multinational
enterprises (MNEs), this paper assesses international employment patterns.
It analyzes determinants of location choice and the degree of
substitutability of labor across locations. Countries with highly skilled
labor forces attract German MNEs, but we find no such evidence for Swedish
MNEs. This is consistent with the hypothesis that German MNEs locate
production stages intensive in high-skilled labor abroad. In MNEs from
either country, affiliate employment tends to substitute for employment at
the parent firm. At the margin, substitutability is the strongest with
respect to affiliate employment in Western Europe. A one percent larger
wage gap between Germany and locations in Central and Eastern Europe (CEE)
is estimated to be associated with 900 fewer jobs in German parents and
5,000 more jobs in affiliates located in CEE. A one percent larger wage gap
between Sweden and CEE is estimated to be associated with 140 fewer jobs in
Swedish parents and 260 more jobs in affiliates located in CEE.
Keywords: Multinational enterprises; location choice; multinomial choice; labor demand; translog cost function; (follow links to similar papers)
JEL-Codes: F21,; F23,; J21,; J23; (follow links to similar papers)
37 pages, May 2005
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