The Effect of Multinational Firms' Operations on Their Domestic Employment

38 Pages Posted: 7 Jul 2004 Last revised: 19 Jul 2010

See all articles by Irving B. Kravis

Irving B. Kravis

University of Pennsylvania - (Deceased)

Robert E. Lipsey

National Bureau of Economic Research (NBER) at New York (Deceased)

Date Written: November 1988

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

Kravis, Irving B. and Lipsey, Robert E., The Effect of Multinational Firms' Operations on Their Domestic Employment (November 1988). NBER Working Paper No. w2760. Available at SSRN: https://ssrn.com/abstract=226855

Irving B. Kravis

University of Pennsylvania - (Deceased)

N/A

Robert E. Lipsey (Contact Author)

National Bureau of Economic Research (NBER) at New York (Deceased)

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