Citation

Discussion Paper Details

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Title: Multinational Corporations, Wages and Employment: Do Adjustment Costs Matter?

Author(s): Giovanni Bruno and Anna M Falzoni

Publication Date: June 2000

Keyword(s): Adjustment Costs, Dynamic Duality, Labour Demand and Multinational Corporations

Programme Area(s): International Trade and Regional Economics

Abstract: This paper investigates the extent to which expansion of international production by US multinationals reduces labour demand at home and at other foreign locations in the presence of labour adjustment costs. The adjustment-cost model of the firm is applied to estimate short-run and long-run price elasticities between home and foreign labour, using dynamic panel data techniques. Evidence is found of significant adjustment costs for employment in Latin American and Canadian affiliates. Also, due to slow adjustments, the relationship between employment in US parents and in Latin American affiliates is reversed from the short to the long-run, changing from substitution into complementarity. Finally, labour substitution prevails both in the short and in the long-run between locations in the Western Hemisphere and in Europe.

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Bibliographic Reference

Bruno, G and Falzoni, A. 2000. 'Multinational Corporations, Wages and Employment: Do Adjustment Costs Matter?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2471