Locating operations in high labor cost countries – Evidence from Spain

Abstract

The location of operations in high labor cost countries is increasingly discussed in the media, in part for recent declarations and actions from the president of USA, Donald Trump. While this particular instance can be labeled as populist or protectionist, the factors underlying the debate are extremely important: advances in systematic increases in productivity, low population growth, and the transfer of jobs to countries with lower labor costs are creating unemployment and underemployment in developed countries that could eventually result in protectionism and restrictions to free trade. This phenomenon has enormous social and economic implications, and has attracted considerable interest from researchers. In particular, this study provides empirical evidence of the location of manufacturing and services in the context of a European country (Spain), exploring the drivers, social implications and organizational theories that can explain it.