Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 490: Foreign Direct Investment and Employment: Home Country Experience in the United States and Sweden

Magnus Blomström, Gunnar Fors and Robert E. Lipsey
Additional contact information
Magnus Blomström: Stockholm School of Economics, Postal: Box 6501, S-113 83 Stockholm, Sweden
Gunnar Fors: The Research Institute of Industrial Economics, Postal: Box 5501, S-114 85 Stockholm, Sweden
Robert E. Lipsey: National Bureau of Economic Research (NBER), Postal: 50 East 42nd Street, 17th floor, New York, New York 10017-5405, USA

Abstract: We compare the relation between foreign affiliate production and parent employment in U.S. manufacturing multinationals with that in Swedish firms. U.S. multinationals appear to have allocated some of their more labor intensive operations selling in world markets to affiliates in developing countries, reducing the labor intensity in their home production. Swedish multinationals produce relatively little in developing countries and most of that has been for sale within host countries with import-substituting trade regimes. The great majority of Swedish affiliate production is in high-income countries, the U.S. and Europe, and is associated with more employment, particularly blue-collar employment, in the parent companies. The small Swedish-owned production that does take place in developing countries is also associated with more white-collar employment at home. The effects on white-collar employment within the Swedish firms have grown smaller and weaker over time.

Keywords: Foreign direct investment; Home employment

JEL-codes: F23; J23

18 pages, November 1, 1997

Note: The paper has been published in The Economic Journal, Vol. 107, No. 445, 1997.

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