Open Economies Review

, Volume 16, Issue 2, pp 153–174 | Cite as

Home Employment Effects of EU Firms’ Activities in Central and Eastern European Countries

  • Ludo Cuyvers
  • Michel Dumont
  • Glenn Rayp
  • Katrien Stevens


We examine whether or not affiliate production in Central and Eastern Europe (CEEC) affects factor demand in the EU, at the investing firm and sector levels. Using firm level data, we estimate parent labor demand elasticities for a number of manufacturing sectors, following a flexible cost function approach. We find evidence of inter-sector heterogeneity, but not of a substantially greater impact in “low-skilled” intensive sectors. Labor demand in the EU is affected by FDI in the CEEC, both at the investing firm and sector levels. It has a significant sector and non-sector component.

Key words

employment investment multinational firms 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Berndt, Ernst R. and Dieter M. Hesse (1986) “Measuring and Assessing Capacity Utilization in the Manufacturing Sectors of Nine OECD Countries.” European Economic Review 30:961–989.Google Scholar
  2. Blomström, Magnus, Gunnar Fors, and Robert E. Lipsey (1997a) “Foreign Direct Investment and Employment: Home Country Experience in the United States and Sweden.” Cambridge: NBER Working Paper 6205.Google Scholar
  3. Blomström, Magnus, Gunnar Fors, and Robert E. Lipsey (1997b) “Foreign Direct Investment and Employment: Home Country Experience in the United States and Sweden” Economic Journal 107:1787–1797.Google Scholar
  4. Blomström, Magnus and Ari Kokko (2000) Outward Investment, Employment and Wages in Swedish Multinationals. Stockholm: Stockholm School of Economics.Google Scholar
  5. Braconier, Henrik and Karolina Ekholm (2000) “Swedish Multinationals and Competition from High- and Low-wage Locations.” Review of International Economics 8(3):448–461.Google Scholar
  6. Brainard, S. Lael and David A. Riker (1997) “Are US Multinationals Exporting US Jobs!” Cambridge: NBER Working Paper 5958.Google Scholar
  7. Braunerhjelm, Pontus and Lars Oxelheim (1998) “Does Foreign Direct Investment Replace Home Country Investments? The Effect of European Integration on the Distribution of Swedish Investments.” Stockholm: IUI Working Paper 522.Google Scholar
  8. Brenton Paul (1998) “Rising Trade and Falling Wages: A Review of the Theory and the Empirics.” In Paul Brenton and Jacques Pelkmans (eds.), Global Trade and European Workers. Basingstoke: Macmillan, pp. 18–38.Google Scholar
  9. Brenton, Paul, Francesca Di Mauro, and Matthias Lücke (1999) “Economic Integration and FDI: An Empirical Analysis of Foreign Investment in the EU and in Central and Eastern Europe.” “Empirica” 26:95–121.Google Scholar
  10. Bruno, Giovanni and Anna M. Falzoni (2000) “Multinational Corporations, Wages and Employment: Do Adjustment Costs Matter ?” London: CEPR Discussion Paper 2471.Google Scholar
  11. Buch, Claudia M., Robert M. Kokta, and Daniel Piazolo (2003), “Does the East Get What Would Otherwise Flow to the South? FDI Diversion in Europe.” Journal of Comparative Economics 31(1):94–109.Google Scholar
  12. Cuyvers, Ludo, Michel Dumont, Glenn Rayp, and Katrien Stevens (2003) “Wage and Employment Effects in the EU of International Trade with the Emerging Economies.” Review of World Economics (Weltwirtschaftliches Archiv) 139:248–275.Google Scholar
  13. Di Mauro, Francesca (2001), “Economic Integration between the EU and the CEECs: A Sectoral Study,” LICOS Discussion Paper 105/2001, LICOS Centre for Transition Economics, Leuven.Google Scholar
  14. Faini, Ricardo, Anna M. Falzoni, Marzio Galeotti, Rodolfo Helg, and Alessandro Turini (1999) “Importing Jobs and Exporting Firms? On the Wage and Employment Implications of Italian Trade and Foreign Direct Investment Flows.” Giornali degli Economisti e Annali di Economia 58:95–135.Google Scholar
  15. Greene, W.H. (2000) Econometric Analysis. Upper Saddle River (NJ): Prentice Hall.Google Scholar
  16. Hansson, Pär (2000) “Skill Upgrading and Production Transfer within Swedish Multinationals in the 1990s,” Paper Presented at the Centre for European Policy Studies conference “Globalisation and Social Exclusion”, Brussels, 1–2 December 2000.Google Scholar
  17. Haskel, Jonathan E. and Matthew J. Slaughter (2000) “Have Falling Tariffs and Transportation Costs Raised U.S. Wage Inequality”? ” Cambridge: NBER Working Paper 7539.Google Scholar
  18. Hatzius, Jan (1998) “Domestic Jobs and Foreign Wages.” Scandinavian Journal of Economics 100:733–746.Google Scholar
  19. Helpman, Elhanan (1984) “A Simple Theory of International Trade with Multinational Corporations.” Journal of Political Economy 92:451–472.Google Scholar
  20. Helpman, Elhanan and Paul Krugman (1985) Market Structure and Foreign Trade, Increasing Returns, Imperfect Competition and the International Economy. Cambridge: MIT Press.Google Scholar
  21. IMF and OECD (1999) Report on the Survey of Implementation of Methodological Standards for Direct Investment. Paris: OECD.Google Scholar
  22. Judge, George G., William E. Griffiths, R. Carter Hill, Helmut Lutkepohl, and Tsoung-Chao Lee (1985) The Theory and Practice of Econometrics, 2nd edition, New York: John Wiley & Sons.Google Scholar
  23. Konings, Jozef and Alan Murphy (2001) “Do Multinational Enterprises Substitute Parent Jobs for Foreign Ones? Evidence from European Firm-Level Panel Data.” London: CEPR Discussion Paper 2972.Google Scholar
  24. Kravis, Irving B. and Robert E. Lipsey (1988) “The Effect of Multinational Firms’ Foreign Operations on Their Domestic Employment.” Cambridge: NBER Working Paper 2760.Google Scholar
  25. Krugman, Paul R. (1995) “Increasing Returns, Imperfect Competition and the Positive Theory of International Trade.” In Gene M. Grossman and Kenneth Rogoff (eds.), Handbook of International Economics (Volume 3). Amsterdam: Elsevier Science, pp. 1243–1277.Google Scholar
  26. Morrison, Catherine (1988) “Quasi-Fixed Inputs in U.S. and Japanese Manufacturing: A Generalized Leontief Restricted Cost Function Approach.” Review of Economics and Statistics 70:275–287.Google Scholar
  27. Morrison Paul, Catherine J. and Donald Siegel (1999) “Scale Economies and Industry Agglomeration Externalities: A Dynamic Cost Function Approach.” American Economic Review 89:272–290.Google Scholar
  28. Morrison Paul, Catherine and Donald Siegel (2001) “The Impacts of Technology, Trade and Outsourcing on Employment and Labour Composition.” Scandinavian Journal of Economics 103:241–264.Google Scholar
  29. Riker, David A. and S. Lael Brainard (1997) “US Multinationals and Competition from Low Wage Countries.” Cambridge: NBER Working Paper 5959.Google Scholar
  30. Slaughter, Matthew J. (1995) “Multinational Corporations, Outsourcing, and American Wage Divergence.” Cambridge: NBER Working Paper 5253.Google Scholar
  31. Slaughter, Matthew J. (2000) “Production Transfer Within Multinational Enterprises and American Wages.” Journal of International Economics 50:449–472.Google Scholar
  32. TSP International (1999), Reference Manual (Version 4.5).Google Scholar
  33. UNCTAD (2001) World Investment Report: Promoting Linkages. New York-Geneva: United Nations.Google Scholar

Copyright information

© Springer Science + Business Media, Inc. 2005

Authors and Affiliations

  • Ludo Cuyvers
    • 1
  • Michel Dumont
    • 1
  • Glenn Rayp
    • 2
  • Katrien Stevens
    • 2
  1. 1.University of Antwerp, Faculty of Applied EconomicsAntwerpBelgium
  2. 2.Ghent University, Faculty of Economics and Business Administration and SHERPPAGhentBelgium

Personalised recommendations