This study uses data on Swedish multinationals to estimate cross‐elasticities of labor demand in different locations. With a vertical decomposition of the firm’s activities, whether there is substitution or complementarity between employment in different parts of the firm will depend on whether wage changes lead to a relocation of activities or simply to changes in marginal costs and/or demand for inputs in other parts of the firms. It is found that there is some evidence of a substitutionary relationship between employment in the Swedish parts of the firms and employment in other high‐income locations, but no evidence of substitution stemming from employment in low‐income locations.
Review of International Economics
Swedish Multinationals and Competition from High‐ and Low‐Wage Locations