Working Paper: CEPR ID: DP3052
Authors: Henrik Braconier; Karolina Ekholm
Abstract: We use firm-level data on Swedish multinationals to analyse how the recent expansion of affiliate employment in Central and Eastern Europe (CEE) has affected affiliate employment elsewhere. According to our results, employment in affiliates located in other low-wage countries in Europe decreased substantially as a consequence of the expansion in CEE. Furthermore, affiliate activities in these countries have become more sensitive to changes in labour costs as firms have set up production in CEE. We find that employment in Sweden and other high-wage European countries has also been affected, but these effects seem to be much smaller.
Keywords: Central and Eastern Europe; Foreign Direct Investment; Multinational Enterprises
JEL Codes: F23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Expansion of affiliate employment in CEE (M51) | Employment reductions in Sweden (J63) |
| Expansion of affiliate employment in CEE (M51) | Employment reductions in other low-wage European countries (F66) |
| Employment reductions in other European locations (J63) | Average employment in all non-CEE locations decreased (F29) |
| Labor cost increases in Southern Europe (J39) | Sensitivity of affiliate employment in CEE (J68) |
| Expansion in CEE (E69) | Contraction in employment in Sweden (J63) |