Do Multinational Enterprises Relocate Employment to Low Wage Regions? Evidence from European Multinationals
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Date
2005-03
Authors
Konings, Jozef
Murphy, Alan
Journal Title
Journal ISSN
Volume Title
Publisher
Central Bank and Financial Services Authority of Ireland
Abstract
This paper analyses the employment behavior of 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 affiliates. The affiliates are located either in the European Union
divided into (North, South), Central and Eastern Europe or both.
We find that for parent firms operating in the manufacturing sector the elasticity of parent
employment with respect to North EU affiliates’ labour costs is positive and statistically
significant, ranging from 0.03 to 0.08, depending on the specification considered. 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. This
substitution effect becomes stronger when affiliates are operating in a different sector than their
parent firm.
However, 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.
Furthermore, substitution effects are absent for parent firms operating in the non-manufacturing
sector.
Our results suggest that on average during the period of this study competition from low
wage countries in Central and Eastern Europe and the South of the EU did not contribute to a
relocation of domestic jobs to these low wage regions.
Description
Keywords
relocation, multinational enterprises, labour demand, Research Subject Categories::SOCIAL SCIENCES::Business and economics
Citation
Konings Jozef, Murphy Alan, 2005, Central Bank and Financial Services Authority of Ireland; Do Multinational Enterprises Relocate Employment to Low Wage Regions? Evidence from European Multinationals. http://nur.nu.edu.kz/handle/123456789/1886