Does the Opening of Central and Eastern Europe Threaten Employment in the West?

Abraham, Filip; Konings, Josef

doi:10.1111/1467-9701.00218

Cited by 16 publications

(10 citation statements)

References 17 publications

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“…So, this suggests that there are many factors why 'vertical' FDI in CEE may be less likely to take place, but rather 'horizontal' FDI, aimed at obtaining first mover advantages and market access. This is also what was found by earlier work on FDI flows in CEE based on firm level surveys: Lankes and Venables (1996) and Abraham and Konings (1999) use firm level survey data and find that labor costs were not the most important factor to invest in CEE, rather strategic reasons related to market penetration and expansion were the main driving forces behind FDI in CEE.…”

Section: Resultssupporting

confidence: 79%

Do Multinational Enterprises Substitute Parent Jobs for Foreign Ones? Evidence from Firm Level Panel Data

Konings

Murphy

2001

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Non-Technical SummaryThe increased globalization of the world economy has stirred the fear that domestic employment will be relocated to the lower wage countries. The signing of the NAFTA agreements in the US and the liberalization of the economies in Central and Eastern Europe, which resulted in the Association Agreements with the EU, have contributed to this fear. This has driven an ongoing debate about the role of international trade in contributing to labor market distortions. However, there is still no consensus about the extent to which globalization has mattered in affecting the demand for home jobs.One of the most obvious channels through which home jobs may be affected is the employment allocation of multinational enterprises (MNEs). However, For firms operating in the service sectors we find no evidence of employment relocation, while for firms that operate in the wholesale sectors (distribution) we find relocation to the lower wage subsidiaries in Central and Eastern Europe.The results of this paper suggest that foreign direct investment in Central and Eastern Europe is mainly taking place to obtain market access and to achieve a strategic position in the emerging markets, rather than to exploit cheap labour costs.In contrast, foreign direct investment within the EU seems to be driven by labour cost We investigate whether employment in the MNEs' subsidiaries are substitutes for home employment or in other words we investigate whether European MNEs can easily relocate employment between the parent and their daughter(s).Our main findings can be summarized as follows: (i) We find evidence for substitution effects between parent and foreign employment. A decline of 10% in MNE affiliate's wage costs is associated with a decline in parent employment of between 1.5% and 2% on average. (ii) This effect is mainly driven by firms that operate in the manufacturing sector. Moreover, the substitution effects mainly take place between EU parents and their affiliates located within the EU, rather than affiliates located in Central and Eastern Europe. (iii) We also report results for the non-manufacturing firms, where we find no substitution effects between parents and daughters in the service sectors, while we do find positive substitution effects between parents and their affiliates in Central and Eastern Europe for the firms operating in the wholesale trade and construction sectors.Our results suggest that on average the competit...

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Section: Resultssupporting

confidence: 79%

Do Multinational Enterprises Substitute Parent Jobs for Foreign Ones? Evidence from Firm Level Panel Data

Konings

Murphy

2001

SSRN Journal

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“…Lankes andVenables, 1996, Abraham andKonings, 1999 it is worth mentioning -as a background -the distinction that is made in the literature between horizontal and vertical FDI because this is also related to labour cost differentials in different locations. The vertical FDI viewpoint is that the MNE locates in a particular place to take advantage of international factor-price differences (e.g.…”

Section: Related Literaturementioning

confidence: 99%

Do Multinational Enterprises Relocate Employment to Low-Wage Regions? Evidence from European Multinationals

2006

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This paper analyses the employment behavior of multinational enterprises (MNEs) in Europe.To this end we use a unique firm level panel data set of more than 1,000 European multinational parent enterprises and their affiliates. The affiliates are located either in the European Union divided into (North, South), Central and Eastern Europe or both.We find that for parent firms operating in the manufacturing sector the elasticity of parent employment with respect to North EU affiliates' labour costs is positive and statistically significant, ranging from 0.03 to 0.08, depending on the specification considered. This implies employment substitution between parents and their North EU based affiliates takes place in response to wage cost differentials between the parent and its North EU based affiliates. This substitution effect becomes stronger when affiliates are operating in a different sector than their parent firm.However, we find no evidence for such substitution effects between parent employment and its affiliates that are located in low wage regions in the EU and in Central and Eastern Europe.Furthermore, substitution effects are absent for parent firms operating in the non-manufacturing sector.Our results suggest that on average during the period of this study competition from low wage countries in Central and Eastern Europe and the South of the EU did not contribute to a relocation of domestic jobs to these low wage regions. JEL classification:F23, J23

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“…In line with research for the US, several authors have found that international trade matters for the evolution of European employment and wages levels, f.e. Abraham and Konings (1999), Kramarz (2003) and Brock and Dobbelaere (2006). This research furthermore suggests that structural rigidities in European product and labor markets are a key factor in the transmission from global trade shocks to labor markets.…”

Section: Introductionmentioning

confidence: 78%

Price and Wage Setting in an Integrating Europe: Firm Level Evidence

2006

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Statement of purpose:The purpose of these working papers is to promote the circulation of research results (Research Series) and analytical studies (Documents Series) made within the National Bank of Belgium or presented by external economists in seminars, conferences and conventions organised by the Bank. The aim is therefore to provide a platform for discussion. The opinions expressed are strictly those of the authors and do not necessarily reflect the views of the National Bank of Belgium. AbstractEurope has witnessed the last decade an accelerated process of economic integration. Trade barriers were removed, the euro was introduced and ten new member states entered the European Union. Economic integration is likely to have an impact on both labor and product markets. Unlike most other papers, that focus on product and labor markets separately, we look at the link between globalization and product and labor market imperfections simultaneously. To this end, we rely on a rich panel of manufacturing firms in Belgium, a small open economy. We find that union bargaining power is higher in sectors characterized by high price cost margins. Moreover, ignoring imperfections on the labor market, leads to an underestimation of product market power.Concerning the influence of globalization, our main findings are that both price cost margins and union bargaining power are typically lower in sectors that are subject higher international competition. This result is especially true for competition from low wage countries. JEL-code : F16, J50, L13.

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Does the Opening of Central and Eastern Europe Threaten Employment in the West?

Cited by 16 publications

References 17 publications

Do Multinational Enterprises Substitute Parent Jobs for Foreign Ones? Evidence from Firm Level Panel Data

Do Multinational Enterprises Substitute Parent Jobs for Foreign Ones? Evidence from Firm Level Panel Data

Do Multinational Enterprises Relocate Employment to Low-Wage Regions? Evidence from European Multinationals

Price and Wage Setting in an Integrating Europe: Firm Level Evidence

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