DP2524 Outward Investment, Employment and Wages in Swedish Multinationals

Author(s): Magnus Blomström, Ari Kokko
Publication Date: November 2000
Keyword(s): Employment, FDI, Wages
JEL(s): F23
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2524

Examining detailed data on Swedish MNCs during the period 1986-1994, this paper shows that there are signs of very notable structural changes in the home country operations of these corporations. It also shows that the character of these changes varies according to economic conditions in the home country. In the 1980s, when the Swedish economy was characterized as having high taxes, high inflation rates, and a tight labour market, relatively attractive jobs within the MNCs were relocated from Swedish plants to foreign affiliates. In the 1990s, by contrast, when the financial crisis had necessitated a host of micro and macroeconomic reforms, the location decisions of the MNCs were more favourable for the Swedish economy. The new jobs created by the MNCs were found in activities with relatively high productivity and wages. This suggests that the home country effects of FDI are, to a large extent, determined by the home country?s economic environment.