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Review of World Economics

, Volume 149, Issue 4, pp 611–630 | Cite as

Domestic multinationals, foreign affiliates, and labour demand elasticities

  • Olivier N. Godart
  • Holger GörgEmail author
  • David Greenaway
Original Paper

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.

Keywords

Labour demand elasticity Multinational firms Headquarter services Skill intensity 

JEL Classification

F23 J23 J24 

Notes

Acknowledgments

We would like to thank an anonymous referee, seminar participants at Nottingham, the Kiel Institute and the ETSG conference in Warsaw for their comments and suggestions. Olivier Godart is thankful to the Leverhulme Centre for Research on Globalisation and Economic Policy for a GEP Ph.D. scholarship.

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Copyright information

© Kiel Institute 2013

Authors and Affiliations

  • Olivier N. Godart
    • 1
    • 2
  • Holger Görg
    • 1
    • 2
    • 3
    • 4
    Email author
  • David Greenaway
    • 3
  1. 1.Kiel Institute for the World EconomyKielGermany
  2. 2.University of KielKielGermany
  3. 3.GEPUniversity of NottinghamNottinghamUK
  4. 4.CEPRLondonUK

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