Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81376
Authors: 
Norbäck, Pehr-Johan
Duanmu , Jing-Lin
Skedinger, Per
Year of Publication: 
2012
Series/Report no.: 
IFN Working Paper 935
Abstract: 
In this paper we show, theoretically and empirically, that stronger employment protection legislation (EPL) in a host country has important and differing effects on the various activities of multinational enterprises (MNEs). Using micro data on affiliates to Swedish multinational firms in 20 countries for the period of 1965–1998, we find that increased stringency in EPL is associated with fewer investments in new affiliates and lower employment in existing affiliates. We also find that it is mainly affiliate exports that are affected negatively by stronger EPL, while the impact on local sales is small. This is in accordance with our theoretical model, which predicts that the impact of EPL on the costs of competing firms is likely to put affiliates at a smaller disadvantage when selling for the local market than in the production for exports.
Subjects: 
Labor market institutions
Firm heterogeneity
Oligopoly
Platform-FDI
Horizontal-FDI
Micro data
JEL: 
C20
F23
J80
Document Type: 
Working Paper

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