Adjusting Labour Demand: Multinational vs. National Firms. A Cross-European Analysis

Centro Studi Luca d'Agliano Development Studies Working Paper No. 168

20 Pages Posted: 23 Jan 2003

See all articles by Giorgio Barba Navaretti

Giorgio Barba Navaretti

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM); University of Milan - Centro Studi Luca d'Agliano (LdA)

Daniele Checchi

Università degli Studi di Milano - Dipartimento di Economia Politica e Aziendale (DEPA); IZA Institute of Labor Economics; IRVAPP

Alessandro Turrini

European Commission; Centre for Economic Policy Research (CEPR)

Date Written: November 2002

Abstract

This paper provides a cross-country perspective to the firm-level analysis of the relation between foreign ownership and labour demand. We estimate labour demand equations in eleven European countries using dynamic panel data techniques on samples that permit to distinguish the ownership status of firms. We find that the employment adjustment is significantly faster in MNEs' affiliates, irrespective of the country investigated. As for the wage elasticity of labour demand, MNEs show smaller elasticities compared with national firms, and very little variation across countries. Cross-country correlations show that the relative value of wage elasticities in MNEs on that in NEs is positively related to country-level indexes of labour market regulation (employment protection, union presence,...). We interpret the results as follows. MNEs tend to have a more rigid demand for total labour (possibly due to a different skill composition). However, being MNEs relatively "footloose", this difference tends to vanish as the rigidity of employment regulations rises.

Keywords: multinational firms, labour demand elasticity, employment adjustment costs

JEL Classification: F23, J23

Suggested Citation

Barba Navaretti, Giorgio and Checchi, Daniele and Turrini, Alessandro, Adjusting Labour Demand: Multinational vs. National Firms. A Cross-European Analysis (November 2002). Centro Studi Luca d'Agliano Development Studies Working Paper No. 168. Available at SSRN: https://ssrn.com/abstract=348342 or http://dx.doi.org/10.2139/ssrn.348342

Giorgio Barba Navaretti (Contact Author)

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM) ( email )

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University of Milan - Centro Studi Luca d'Agliano (LdA) ( email )

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Daniele Checchi

Università degli Studi di Milano - Dipartimento di Economia Politica e Aziendale (DEPA) ( email )

Milan, 20122
Italy
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+39 02 5032 1505 (Fax)

IZA Institute of Labor Economics

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Germany

IRVAPP ( email )

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Alessandro Turrini

European Commission ( email )

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B-1049 Brussels
Belgium
+32 2 299 5072 (Phone)
+32 2 299 3505 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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