Location choice and employment decisions: a comparison of German and Swedish multinationals

Sascha O. Becker, Karolina Ekholm, Robert Jäckle, Marc Andreas Muendler

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Abstract

Using data on German and Swedish multinational enterprises (MNEs), this paper analyzes determinants of location choice and the degree of substitutability of labor across locations. Countries with highly skilled labor strongly attract German but not necessarily Swedish MNEs. In MNEs from either country, affiliate employment tends to substitute for employment at the parent firm. At 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 associated with 760 fewer jobs at German parents and 4,620 more jobs at affiliates in CEE. A one percent larger wage gap between Sweden and CEE is associated with 140 fewer jobs at Swedish parents and 260 more jobs at affiliates in CEE.

Original languageEnglish
Pages (from-to)693-731
Number of pages39
JournalReview of World Economics
Volume141
Issue number4
DOIs
Publication statusPublished - Dec 2005
Externally publishedYes

Keywords

  • Labor demand
  • Location choice
  • Multinational enterprises
  • Multinomial choice
  • Translog cost function

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