Domestic jobs and foreign wages: labour demand in Swedish multinationals

The labour demand decisions of multinational corporations (MNCs) are likely to depend not only on domestic, but also on foreign labour costs. This paper tests this hypothesis by estimating labour demand equations for a sample of Swedish MNCs. Indeed, higher foreign costs increase an MNC''s Swedish employment and reduces its foregin employment. As MNCs become more important in many OECD countries, the role of foreign labour costs in the determination of aggregate domestic employment is likley to increase.