Working Paper Series,
Trade Union Institute for Economic Research

Abstract: This paper studies the link between production transfer in Swedish-headquartered multinational enterprises (MNEs) and skill upgrading in Swedish manufacturing in the 1990s. The analysis distinguishes between horizontal and vertical foreign direct investment (FDI). The increased employment share in affiliates in non-OECD countries (vertical FDI) has a non-trivial, significantly positive effect on the share of skilled labor in the Swedish parents. On the other hand, the skill upgrading in the parents is unrelated to employment changes in their affiliates in other OECD countries (horizontal FDI). The latter is consistent with implications of the newly developed horizontal MNE models.

Keywords: Multinational enterprise; Skill upgrading; Horizontal foreign direct in-vestment; Vertical foreign direct investment

JEL-codes: F21; F23; J31

27 pages, January 19, 2001

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