Margins of Multinational Labor Substitution

Marc-Andreas Muendler and Sascha Becker

No 2131, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Multinational labor demand 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 have rarely found foreign wages or operations to affect employment. Our strategy detects salient adjustments at the extensive margin for German MNEs. With every percentage increase in German wages, German MNEs allocate 2,000 manufacturing jobs to Eastern Europe at the extensive margin and 4,000 jobs overall.

Keywords: multinational enterprise; location choice; sample selectivity; labor demand; translog cost function; nonparametric estimation (search for similar items in EconPapers)
JEL-codes: C14 C24 F21 F23 J23 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2006-05
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

Published - published in: American Economic Review, 2010, 100 (5), 1999-2030

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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)
Working Paper: Margins of multinational labor substitution (2006)
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