Prague Economic Papers 2017, 26(3):345-359 | DOI: 10.18267/j.pep.617

Multinational Resilience or Dispensable Jobs? German FDI and Employment in the Czech Republic Around the Great Recession

Michael Moritz1, Bastian Stockinger2, Merlind Trepesch3
1 Institute for Employment Research (IAB), Nuremberg, Germany (michael.moritz@iab.de)
2 Institute for Employment Research (IAB), Nuremberg, Germany (bastian.stockinger@iab.de)
3 Institute for Employment Research (IAB), Nuremberg, Germany (merlind.trepesch@iab.de)

This article investigates the employment development in Czech-based firms in German ownership in the years around the Great Recession of 2008/2009. The intense involvement of German firms in the economy of the neighbouring country via foreign direct investment (FDI) raises a question whether under the conditions of a historically deep global downturn, the Czech employees in multinational companies were confronted with an increased volatility of their jobs. Using a unique firm-level dataset, we contrast the affiliates of German investors with purely Czech-owned enterprises. Our findings indicate that in the years before the crisis, firms with German capital exhibited a noticeably more positive employment development. The results from the year 2008 onwards give reason to the conclusion that the German-owned firms played a stabilizing role for the Czech labour market during the recession.

Keywords: financial crisis, multinational firms, foreign direct investment, employment volatility, Germany, the Czech Republic
JEL classification: F23, G01, J21

Published: June 1, 2017  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Moritz, M., Stockinger, B., & Trepesch, M. (2017). Multinational Resilience or Dispensable Jobs? German FDI and Employment in the Czech Republic Around the Great Recession. Prague Economic Papers, 26(3), 345-359. doi: 10.18267/j.pep.617
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. AHK (2014). Investment Climate Survey Central and Eastern Europe 2014. Detailed Results of the 9th Joint Survey of the German Chambers of Commerce and Industry (AHK) in 16 Countries across Central and Eastern Europe. Available at: http://www.ahkungarn.hu/fileadmin/ahk_ungarn/Dokumente/Bereich_CC/Publikationen/Konjunktur/2014/AHK_Investment_Climate_Survey_-_CEE_2014.pdf
    2. Alfaro, L., Chen, M. X. (2012). Surviving the Global Financial Crisis: Foreign Ownership and Establishment Performance. American Economic Journal: Economic Policy, 4(3), 30-55, http://dx.doi.org/10.1257/pol.4.3.30 Go to original source...
    3. Álvarez, R., Görg, H. (2009). Multinationals and Plant Exit: Evidence from Chile. International Review of Economics & Finance, 18(1), 45-51, http://dx.doi.org/10.1016/j.iref.2008.02.011 Go to original source...
    4. _______ (2012). Multinationals as Stabilisers? Economic Crisis, Access to Finance, and Employment Growth. The Journal of Development Studies, 48(7), 847-863, http://dx.doi.org/10.1080/00220388.2011.621943 Go to original source...
    5. Amendola, A., Ferragina, A. M., Pittiglio, R., Reganati, F. (2012). Are Exporters and Multinational Firms More Resilient over a Crisis? First Evidence for Manufacturing Enterprises in Italy. Economics Bulletin, 32(3), 1914-1926. Available at: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I3-P185.pdf
    6. Andrews, M., Bellmann, L., Schank, T., Upward, R. (2012). Foreign-Owned Plants and Job Security. Review of World Economics, 148(1), 89-117, http://dx.doi.org/10.1007/s10290-011-0110-1 Go to original source...
    7. Babecký, J., Galu¹èák, K., Lízal, L. (2012). Firm-level Labour Demand: Adjustment in Good Times and During the Crisis. CERGE-EI Working Paper Series, No. 468. Available at: http://www.cerge-ei.cz/pdf/wp/Wp468.pdf
    8. Barba Navaretti, G., Checchi, D., Turrini, A. (2003). Adjusting Labor Demand: Multinational versus National Firms: A Cross-European Analysis. Journal of the European Economic Association, 1(2-3), 708-719, http://dx.doi.org/10.1162/154247603322391332 Go to original source...
    9. Bergin, P. R., Feenstra, R. C., Hanson, G. H. (2007). Outsourcing and Volatility. National Bureau of Economic Research Working Paper Series, No. 13144. Available at: http://www.nber.org/papers/w13144 Go to original source...
    10. _______ (2009). Offshoring and Volatility: Evidence from Mexico's Maquiladora Industry. American Economic Review, 99(4), 1664-1671. http://dx.doi.org/10.1257/aer.99.4.1664 Go to original source...
    11. Bisnode (2015). MagnusWeb: Complete Information about Czech and Slovak Companies. Bisnode.cz. Available at: http://www.bisnode.cz/wp-content/uploads/2015/06/en_magnusweb_produktovy-list.pdf
    12. Buch, C. M., Lipponer, A. (2010). Volatile Multinationals? Evidence from the Labor Demand of German Firms. Labour Economics, 17(2), 345-353. http://dx.doi.org/10.1016/j.labeco.2009.06.004 Go to original source...
    13. Czech Statistical Office (2015). Labour Market in the Czech Republic - Time Series - 1993 - 2014. Czech Statistical Office. Available at: http://www.czso.cz/csu/czso/201-r-employed-persons-by-areas-and-regions-3xzughtodq
    14. Desai, M. A., Foley, C. F., Forbes, K. J. (2008). Financial Constraints and Growth: Multinational and Local Firm Responses to Currency Depreciations. Review of Financial Studies, 21(6), 2857-2888, http://dx.doi.org/10.1093/rfs/hhm017 Go to original source...
    15. Fabbri, F., Haskel, J. E., Slaughter, M. J. (2003). Does Nationality of Ownership Matter for Labor Demands? Journal of the European Economic Association, 1(2-3), 698-707, http://dx.doi.org/10.1162/154247603322391323 Go to original source...
    16. Ger¹l, A. (2008). Productivity, Export Performance, and Financing of the Czech Corporate Sector: The Effects of Foreign Direct Investment. Finance a úvìr-Czech Journal of Economics and Finance, 58(5-6), 232-247. Available at: http://journal.fsv.cuni.cz/storage/1130_1130_str_231_247--gersl.pdf
    17. Ger¹l, A., Hlaváèek, M. (2007). Foreign Direct Investment, Corporate Finance, and the Life Cycle of Investment. Finance a úvìr-Czech Journal of Economics and Finance, 57(9-10), 448-464.
    18. Godart, O., Görg, H., Hanley, A. (2012). Surviving the Crisis: Foreign Multinationals versus Domestic Firms. The World Economy, 35(10), 1305-1321, http://dx.doi.org/10.1111/j.1467-9701.2012.01485.x Go to original source...
    19. Görg, H., Henry, M., Strobl, E., Walsh, F. (2009). Multinational Companies, Backward Linkages, and Labour Demand Elasticities. Canadian Journal of Economics, 42(1), 332-348, http://dx.doi.org/10.1111/j.1540-5982.2008.01510.x Go to original source...
    20. Görg, H., Strobl, E. (2003). Footloose' Multinationals? The Manchester School, 71(1), 1-19. http://dx.doi.org/10.1111/1467-9957.00331 Go to original source...
    21. Helpman, E., Melitz, M. J., Yeaple, S. R. (2004). Export versus FDI with Heterogeneous Firms. American Economic Review, 94(1), 300-316, http://dx.doi.org/10.1257/000282804322970814 Go to original source...
    22. Hijzen, A., Swaim, P. (2010). Offshoring, Labour Market Institutions and the Elasticity of Labour Demand. European Economic Review, 54(8), 1016-1034, http://dx.doi.org/10.1016/j.euroecorev.2010.04.001 Go to original source...
    23. Jurajda, ©., Stanèík, J. (2013). Organization and Firm Performance in the Czech Republic. Prague Economic Papers, 22(1), 85-110, http://dx.doi.org/10.18267/j.pep.442 Go to original source...
    24. Lipsey, R. E. (2001). Foreign Direct Investors in Three Financial Crises. National Bureau of Economic Research Working Paper Series, No. 8084. Available at: http://www.nber.org/papers/w8084.pdf Go to original source...
    25. Nilsson H. K., Heyman, F., Sjöholm, F. (2010). Multinationals, Skills, and Wage Elasticities. Review of World Economics, 146(2), 263-280, http://dx.doi.org/10.1007/s10290-009-0047-9 Go to original source...
    26. Peters, H., Weigert, B. (2013). Beschäftigungsentwicklung innerhalb multinationaler Unternehmen während der globalen Rezession 2008/2009. (Employment Changes Within German Multinational Companies During the Global Recession 2008/2009) Jahrbücher für Nationalökonomie und Statistik, 233(4), 505-525, http://dx.doi.org/10.1515/jbnst-2013-0405 Go to original source...
    27. Pflüger, M., Blien, U., Möller, J., Moritz, M. (2013). Labor Market Effects of Trade and FDI: Recent Advances and Research Gaps. Jahrbücher für Nationalökonomie und Statistik, 233(1), 86-116, http://dx.doi.org/10.1515/jbnst-2013-0107 Go to original source...
    28. Rodrik, D. (1997). Has Globalization Gone Too Far? Washington: Institute for International Economics. ISNB: 0-88132-241-5.
    29. Statistisches Bundesamt (2016). Employment: Persons Engaged in Economic Activity, Germany. Statistisches Bundesamt. Available at: http://www.destatis.de/EN/FactsFigures/NationalEconomyEnvironment/LabourMarket/Employment/TablesEmploymentAccounts/PersonseEconomicActivity.html
    30. Tong, H., Wei, S.-J. (2011). The Composition Matters: Capital Inflows and Liquidity Crunch During a Global Economic Crisis. Review of Financial Studies, 24(6), 2023-2052, http://dx.doi.org/10.1093/rfs/hhq078 Go to original source...
    31. Varum, C. A., Rocha, V. C. B. (2011). Do Foreign and Domestic Firms Behave any Different during Economic Slowdowns? International Business Review, 20(1), 48-59, http://dx.doi.org/10.1016/j.ibusrev.2010.06.001 Go to original source...
    32. Wagner, J., Weche Gelübcke, J. P. (2014). Risk or Resilience? The Role of Trade Integration and Foreign Ownership for the Survival of German Enterprises During the Crisis 2008-2010. Jahrbücher für Nationalökonomie und Statistik, 234(6), 757-774, http://dx.doi.org/10.1515/jbnst-2014-0606 Go to original source...

    This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content