Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 523: Swedish Multinationals and Competition from High- and Low-Wage Locations

Henrik Braconier and Karolina Ekholm ()
Additional contact information
Henrik Braconier: The Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Karolina Ekholm: The Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

Abstract: 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 relationshipof complementarity between employment in different affiliates.

Keywords: Labour demand; Multinational firms; Vertically integrated firms

JEL-codes: F23; J23

29 pages, November 1, 1999

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