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Domestic multinationals, foreign affiliates, and labour demand elasticities

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  • Olivier Godart
  • Holger Görg
  • David Greenaway

Abstract

Using information on a panel of multinational firms operating in the United Kingdom from 1996 to 2005, we find that labour demand in domestic multinationals is less sensitive to labour cost changes than in foreign multinationals. This difference in the wage elasticity of labour demand persists even when we control for the skill intensity of firms or their level of intangible assets. This is in line with an interpretation that the provision of headquarter services in domestic multinational firms protects against strong fluctuations in labour demand. Overall, our results suggest that the wage elasticity of labour demand is about 40 % lower in domestic than in foreign multinationals. Copyright Kiel Institute 2013

Suggested Citation

  • Olivier Godart & Holger Görg & David Greenaway, 2013. "Domestic multinationals, foreign affiliates, and labour demand elasticities," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(4), pages 611-630, December.
    • Handle: RePEc:spr:weltar:v:149:y:2013:i:4:p:611-630
    DOI: 10.1007/s10290-013-0166-1
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    More about this item

    Keywords

    Labour demand elasticity; Multinational firms; Headquarter services; Skill intensity; F23; J23; J24;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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