Multinational investment, industry risk, and policy competition
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Date
2001-12Metadata
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- Discussion papers (SAM) [667]
Abstract
In an uncertain business climate, multinational enterprises must take account
of future exit costs in deciding where to locate a branch plant. We study how
differences in national labour-market conditions between countries influence
this decision. Other things equal, the most attractive location has a flexible
labour market (low closure costs) together with a low opportunity cost of
employment (high unemployment). In a game between two countries, a nation
with an inflexible labour market and high unemployment will succeed in
attracting low-risk firms, while that with more flexible labour markets and low unemployment will win the game for higher risk firms.
Publisher
Norwegian School of Economics and Business Administration. Department of EconomicsSeries
Discussion paper2001:35