DP2323 Swedish Multinationals and Competition from High- and Low-Wage Locations

Author(s): Henrik Braconier, Karolina Ekholm
Publication Date: December 1999
Keyword(s): Labour Demand, Multinational Firms, Vertically Integrated Firms
JEL(s): F23, J23
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2323

This study uses data on Swedish multinationals to estimate cross elasticities of labour demand in different locations. With a vertical decomposition of the firm's activities, whether there is substitution or complementarity between employment in different parts of the firm will depend on whether wage changes lead to a relocation of activities or simply to changes in marginal costs and/or demand for inputs in other parts of the firms. We find that there is some evidence of a substitutionary relationship between employment in the Swedish parts of the firms and employment in other high-income locations, but we do not find any evidence of substitution stemming from employment in low-income locations. We find mainly a relationship of complementarity between employment in different affiliates.