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Title:Margins of multinational labor substitution PDF Logo
Authors:Muendler, Marc-Andreas
Becker, Sascha O.
Issue Date:2006
Series/Report no.:IZA Discussion Papers 2131
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.
Subjects:multinational enterprise
location choice
sample selectivity
labor demand
translog cost function
nonparametric estimation
JEL:F21
F23
C14
C24
J23
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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