Margins of Multinational Labor Substitution

Marc-Andreas Muendler

University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego

Abstract: Multinational labor deman responds to wage differentials at the extensive margin, when a multinational enterprise (MNE) expands into foreign locations, and at the intensive margin, when an MNE operates existing affiliates across locations. We derive conditions for parametric and nonparametric identification of an MNE model to infer elasticities of labor substitution at both margins, controlling for location selectivity. Prior studies rarely found foreign wages or operations to affect employment. Our strategy detects salient adjustments for German MNEs. With a one-percent increase in German wages, German MNEs add 2,000 manufacturing jobs in Eastern Europe at the extensive margin and 4,000 jobs overall; a converse one-percent drop in Eastern European wages is associated with an overall withdrawal of 730 MNE jobs from Germany.

Keywords: Multinational enterprise; location choice; sample selectivity; labor demand; translog cost function; nonparametric estimation (search for similar items in EconPapers)
Date: 2006-04-18
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Citations: View citations in EconPapers (21)

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Related works:
Journal Article: Margins of Multinational Labor Substitution (2010)
Working Paper: Margins of Multinational Labor Substitution (2009)
Working Paper: Margins of Multinational Labor Substitution (2006)
Working Paper: Margins of Multinational Labor Substitution (2006)
Working Paper: Margins of Multinational Labor Substitution (2006)
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