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Labor Market Flexibility as a Determinant of FDI Inflows

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  • Hazel Parcon

    (Department of Economics, University of Hawaii at Manoa)

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    Abstract

    This paper shows that labor market flexibility, measured by labor market standards and regulations, has two opposing effects on FDI inflows. Labor market regulations and standards decrease FDI inflows through the cost channel, but they increase FDI inflows through the productivity channel. Allowing for a non-linear relationship between different indicators of labor market flexibility and FDI inflows revealed that some degree of labor market standards and regulations may be attractive for foreign investors. Results strongly suggest that foreign investments to and from different countries and in different sectors are affected differently by different aspects of labor market standards and regulations.

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    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_08-7.pdf
    File Function: First version, 2008
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    Bibliographic Info

    Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 200807.

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    Length: 51
    Date of creation: 01 Oct 2008
    Date of revision:
    Handle: RePEc:hai:wpaper:200807

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    Related research

    Keywords: foreign direct investment; labor market flexibility;

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    References

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    1. Cheng, Leonard K. & Kwan, Yum K., 2000. "What are the determinants of the location of foreign direct investment? The Chinese experience," Journal of International Economics, Elsevier, vol. 51(2), pages 379-400, August.
    2. Bruce Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," Atlantic Economic Journal, International Atlantic Economic Society, vol. 33(4), pages 383-403, December.
    3. repec:idb:brikps:50538 is not listed on IDEAS
    4. William N. Cooke, 1997. "The Influence of industrial relations factors on U.S. foreign direct investment abroad," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 51(1), pages 3-17, October.
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    Cited by:
    1. Antonio Baez, 2014. "“A panel data analysis of FDI and informal labor markets”," IREA Working Papers 201404, University of Barcelona, Research Institute of Applied Economics, revised Feb 2014.
    2. Antonio Baez, 2014. "“A panel data analysis of FDI and informal labor markets”," AQR Working Papers 201402, University of Barcelona, Regional Quantitative Analysis Group, revised Feb 2014.
    3. Mogab, J. & Kishan, R. & Vacaflores, D.E., 2013. "Labor Market Rigidity And Foreign Direct Investment: The Case Of Europe," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(1), pages 35-54.

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