DP3052 Foreign Direct Investment in Central and Eastern Europe: Employment Effects in the EU

Author(s): Henrik Braconier, Karolina Ekholm
Publication Date: November 2001
Keyword(s): central and eastern europe, foreign direct investment, multinational enterprises
JEL(s): F23
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3052

We use firm-level data on Swedish multinationals to analyse how the recent expansion of affiliate employment in Central and Eastern Europe (CEE) has affected affiliate employment elsewhere. According to our results, employment in affiliates located in other low-wage countries in Europe decreased substantially as a consequence of the expansion in CEE. Furthermore, affiliate activities in these countries have become more sensitive to changes in labour costs as firms have set up production in CEE. We find that employment in Sweden and other high-wage European countries has also been affected, but these effects seem to be much smaller.