The Impact of Territorially Concentraced FDI on Local Labor Markets: Evidence from the Czech Republic
AbstractThis paper investigates the impact of a large territorially concentrated FDI inflow on local labor market outcomes using district panel data from the Czech Republic. Toyota- Peugeot´s joint investment in Kolín is used to quantify the effect of FDI on the district unemployment outflow and inflow rates, the aggregate unemployment exit hazard rates, and subsequently both the unemployment rate and the employment rate. Using difference-in-differences analysis, labor market performance of `treatment' and `control' districts for two periods (before and after the investment) are compared. Placebo simulations reveal that conventional least squares estimates lead to serious underestimation of standard errors. Therefore, in order to account for serial correlation, the block bootstrapping technique is used to compute consistent standard errors. The results indicate a positive significant impact of the investment on the local unemployment outflow rate driven mainly by increases in the aggregate unemployment hazard rates for durations less than nine months. However, the impact on longer unemployment durations remained negligible. Consequently, the local unemployment rate decreased and the employment rate increased in the `treated' district.
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Bibliographic InfoPaper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp348.
Date of creation: Feb 2008
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Labor market; unemployment; employment; foreign direct investment.;
Find related papers by JEL classification:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-03-15 (All new papers)
- NEP-LAB-2008-03-15 (Labour Economics)
- NEP-TRA-2008-03-15 (Transition Economics)
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