Do multinational enterprises relocate employment to low-wage regions? evidence from European multinationals

Jozef Konings, Alan Patrick Murphy

Research output: Contribution to journalReview article

70 Citations (Scopus)

Abstract

This paper analyzes the employment behavior of home multinational enterprises (MNEs) in Europe. To this end we use a unique firm-level panel data set of more than 1,000 European multinational parent enterprises and their European affiliates. We find for parent firms operating in the manufacturing sector that the labor cost elasticity of parent employment with respect to North EU affiliates' labor costs is positive and statistically significant. This implies employment substitution between parents and their North EU based affiliates takes place in response to wage cost differentials between the parent and its North EU based affiliates. In contrast, we find no evidence for such substitution effects between parent employment and its affiliates that are located in low-wage regions in the EU and in Central and Eastern Europe.

Original languageEnglish
Pages (from-to)267-286
Number of pages20
JournalReview of World Economics
Volume142
Issue number2
DOIs
Publication statusPublished - Jul 1 2006

Keywords

  • Labor demand
  • Multinational enterprises
  • Relocation

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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