Agglomeration, Relative Wage Costs and Foreign Direct Investment: Evidence from Swedish MNCs 1974-1998
2009 (English)In: Journal of Industry, Competition and Trade, ISSN 1566-1679, E-ISSN 1573-7012, Vol. 9, no 3, 197-217 p.Article in journal (Refereed) Published
This paper examines the relationship between agglomeration economies and relative wage costs in influencing location of multinational corporations. An inflow of firms to certain regions and industries is likely to increase demand for labor. If mobility of labor is low increased costs can be expected to deter additional inflows of firms, albeit agglomeration economies may compensate for higher wages. Despite its important policy implications this relationship has to our knowledge not been exposed to empirical testing. The empirical analysis finds that foreign direct investment has become increasingly sensitive to differences in wage cost across industrialized countries, but also that agglomeration economies related to knowledge externalities positively influences higher costs. The relative strength of these two forces impacts the spatial distribution of production.
Place, publisher, year, edition, pages
USA: Springer , 2009. Vol. 9, no 3, 197-217 p.
FDI, agglomeration, relative costs
IdentifiersURN: urn:nbn:se:kth:diva-11836DOI: 10.1007/s10842-008-0042-1ScopusID: 2-s2.0-68349128787OAI: oai:DiVA.org:kth-11836DiVA: diva2:284721
QC 201102082010-01-082010-01-082011-02-08Bibliographically approved