Outward Investment, Employment and Wages in Swedish Multinationals

Examining detailed data for the home country operations of Swedish multinationals during the period 1986-1994, this paper shows that there are signs of very notable structural changes in the home country operations of these corporations. It also shows that the effects vary according to economic conditions in the home country. In the 1980s, when the Swedish economy was characterized by high taxes, high inflation rates, and a tight labor market, relatively attractive jobs within the MNCs were relocated from Swedish plants to foreign affiliates. In the 1990s, by contrast, when the financial crisis had necessitated a host of micro and macro economic reforms, the location decision of the MNCs were more favorable for the Swedish economy. New jobs created by the multinationals were found in activities with high productivity and wages. Thus, home country effects of FDI seem, to a large extent, to be determined by the home countries' economic environment. <p>