Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals

42 Pages Posted: 13 Jan 2005

See all articles by Sascha O. Becker

Sascha O. Becker

Monash University - Department of Economics; University of Warwick

Karolina Ekholm

Stockholm School of Economics - Department of Economics; Centre for Economic Policy Research (CEPR); Center for Business and Policy Studies (SNS); CESifo (Center for Economic Studies and Ifo Institute)

Marc-Andreas Muendler

University of California, San Diego (UCSD) - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Robert Jaeckle

Ifo Institute for Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: January 2005

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. On 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

JEL Classification: F21, F23, J21, J23

Suggested Citation

Becker, Sascha O. and Ekholm, Karolina and Muendler, Marc-Andreas and Jaeckle, Robert, Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals (January 2005). Available at SSRN: https://ssrn.com/abstract=648081 or http://dx.doi.org/10.2139/ssrn.648081

Sascha O. Becker (Contact Author)

Monash University - Department of Economics ( email )

Wellington Road
Clayton, Victoria 3
Australia

University of Warwick ( email )

Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
United Kingdom

Karolina Ekholm

Stockholm School of Economics - Department of Economics ( email )

P.O. Box 6501
Sveavagen 65
S-113 83 Stockholm
Sweden
+46 8 736 9220 (Phone)
+46 8 313 207 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Center for Business and Policy Studies (SNS)

Skoldungagatan 2, Box 5629
S-114 86 Stockholm
Sweden

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Marc-Andreas Muendler

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States
858-534-4799 (Phone)
858-534-7040 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Robert Jaeckle

Ifo Institute for Economic Research ( email )

Munich
Germany

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