Margins of multinational labor substitution

Arbeitspapier

Multinational labor demand responds to wage differentials at the extensive margin, when a multinational enterprise (MNE) expands into foreign locations, and at the intensive margin, when an MNE operates existing affiliates across locations. We derive conditions for parametric and nonparametric identification of an MNE model to infer elasticities of labor substitution at both margins, controlling for location selectivity. Prior studies rarely found foreign wages or operations to affect employment. Our strategy detects salient adjustments for German MNEs. With a one-percent increase in German wages, German MNEs add 2,000 manufacturing jobs in Eastern Europe at the extensive margin and 4,000 jobs overall; a converse one-percent drop in Eastern European wages is associated with an overall withdrawal of 730 MNE jobs from Germany.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Paper Series 1 ; No. 2006,24

Classification and Topics

• Classification: Wirtschaft ; International Investment; Long-term Capital Movements ; Multinational Firms; International Business ; Semiparametric and Nonparametric Methods: General ; Labor Demand ; Single Equation Models; Single Variables: Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
• Subject: Multinational enterprise ; location choice ; multiple sample selectivity ; labor demand ; translog cost function ; nonparametric estimation ; Multinationales Unternehmen ; Betriebliche Standortwahl ; Arbeitsnachfrage ; Substitutionselastizität ; Deutschland

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mündler, Marc-Andreas ; Becker, Sascha O.
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/19652
• Last update: 10.03.2025, 11:41 AM CET