Skill Upgrading and Production Transfer within Swedish Multinationals

This paper studies the link between production transfer within Swedish-headquartered multinational enterprises (MNEs) in the manufacturing industry and skill upgrading in their parent companies in the 1990s. The analysis distinguishes between horizontal and vertical foreign direct investment (FDI). The increased employment share in the affiliates in non-OECD countries (vertical FDI) has a non-trivial, significantly positive effect on the share of skilled labor in the Swedish parents. On the other hand, the parents' skill upgrading is unrelated to employment changes in their affiliates in other OECD countries (horizontal FDI). This is consistent with implications of the newly developed horizontal MNE models. Copyright The editors of the "Scandinavian Journal of Economics", 2005 .