Labour Demand Adjustment: Does Foreign Ownership Matter?

Abstract

This paper examines whether multinationals differ in their employment adjustment from domestic companies, using a panel of 5,544 Belgian firms observed between 1998 and 2005. More precisely, we estimate labour adjustment costs by worker and firm types. We propose a new flexible specification that takes into account the role of firm size in adjustment costs. Our results indicate that adjusting white-collar employment is around half as costly for multinational firms (MNFs) as for domestic firms of the same size. The remaining differential in adjustment costs between MNFs and domestic firms might result, among other things, from multinationals' stronger bargaining power.

The Impact of the ‘Scellier’ Income Tax Relief on Building Land Prices in France

“…These results represent one of the main contributions of this study since they shed new light on the efficiency of the selection process of the French market, which is often considered to be rigid, with significant frictions in terms of the adjustment of production factors (Calavrezo & Zilloniz, 2016 ;Dhyne et al, 2015). These results confirm, to a certain extent and without loss of generality, those reported by Cochard et al (2010) highlighting the responsiveness of the French labour market.…”

Long‐run Asymmetries in Labor Demand: Estimating Wage Elasticities of Labor Demand Using a Fractional Panel Probit Model

“…Studies that investigate the short‐run adjustment process use quadratic adjustment cost functions with unequal costs of hiring and firing employees and, therefore, estimate differences in the velocity of the adjustment process (e.g., Dhyne et al ., ; Ilut et al ., ; Yaman, ). Most of the studies detect some differences in the time to adjust to a new equilibrium, but it is not clear whether it is costlier to employ further workers or to dismiss them (Hunt, ).…”

“…The studies that deal with asymmetries mostly analyze dynamic adjustment models and estimate differences in the velocity of the adjustment process (e.g., Azetsu and Fukushige, ; Dhyne et al ., ; Ilut et al ., ). It is important to stress the point that the goal of the work here is to look at the size of the long‐run elasticities and not at the velocity of employment changes.…”

(Not So) Easy Come, (Still) Easy Go? Footloose Multinationals Revisited

“…In order to identify the labour and capital coefficients, we assume, as in Dhyne et al. (), that capital at the beginning of the period is orthogonal to the current productivity shock and that employment adjusts with a time lag to productivity shocks. Appendix A reports the production function coefficients and bootstrapped standard errors, estimated at the one‐digit NACE level.…”

“…For example, the figures reported in Dhyne et al. () show that, in Belgium over the period 1998–2005, among the 87,000 jobs lost due to firms leaving the market, 25,000 were attributable to multinationals, 13,000 to Belgian MNFs and 12,000 to foreign MNFs . The potential footloose nature of MNFs constitutes a further challenge for the countries that implement attractiveness policies (see also Haskel et al., , for relevant examples in Europe).…”