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Blonigen and Slaughter (1999) do not find an effect on skill upgrading associated with inward FDIs in
the US.

The effects of FDI on demand elasticities and employment volatility have been analysed from
different corners and following alternative methodologies. Some studies investigate the degree of
substitutability of employment in MNEs’ plants located in different countries. Brainard and Riker
(1997a), using firm-level data on US multinationals find that the degree of substitution between
employment in parent companies in the US and in foreign affiliates is low. However, the same authors
show that substitution between employment in subsidiaries in alternative low wage locations is quite
strong (Brainard and Riker, 1997b). Bruno and Falzoni (1999), use sector-level data for the US to
estimate dynamic factor demand equations in MNEs. They show that the substitution effects for
employment across subsidiaries are limited to the short run, while in the long run complementarity
effects tend to prevail. Brakonier and Ekholm (2000) look at firm-level data on Swedish multinationals
and find that there is some evidence of substitution between employment in parent companies and
employment in subsidiaries located in high-income countries, but not in those in low-income
countries.7 Finally, Konings and Murphy (2001) use firm-level data on multinational firms of all EU
countries. The authors find a substitution relationship between employment in parent companies and in
subsidiaries, which is significant especially in the case of affiliates located within the EU.

Other papers analyse directly the impact of “globalisation” measures on labour demand elasticities.
Most of this work limits the analysis to the effects of international trade. Results show in general little
relation between trade integration and labour demand elasticities (Slaughter (2001), Bruno, Falzoni, and
Helg (2001), Fanlzylber and Maloney (2000), Krishna, Mitra, and Chinoy (2001)).8 To our knowledge,
Fabbri, Haskel and Slaughter (2002) is the only paper providing a comparison of the elasticity of labour
demand in national and multinational firms. They estimate plant-level demand equations for production
and non-production labour in the UK. Their results show that over time the wage elasticity of demand
for production labour has been rising faster in plants belonging to MNEs.

The footloose nature of MNEs has been investigated with a more direct approach in Gorg and
Strobl (2002), who look at inward FDI in Ireland. In this paper, using a Cox proportional hazard
model, it is analysed whether, controlling for other plant and industry-specific characteristics, there is a
significant difference between the survival rate of domestic and foreign-owned plants, and whether
employment changes in MNEs are more or less persistent than those occurring in domestic plants.

7 A substitution relationship between parent and affiliate employment for Swedish MNEs is also found in Hatzius (1998). In
this paper, however, there is no distinction between the locations of the subsidiaries.

8 However, in Faini et. al. (1999) it is found a positive rank correlation across Italian manufacturing sectors between the
values of labour demand elasticities and the share of employment in foreign subsidiaries.



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