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How Important is Employment Protection Legislation for Foreign Direct Investment Flows in Central and Eastern European Countries?

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Author Info
Markus Leibrecht () (Institute for Public Sector Economics, Vienna University of Economics and Business Administration, Austria)
Johann Scharler () (Department of Economics, Johannes Kepler University Linz, Austria)

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Abstract

The purpose of this paper is to investigate empirically the importance of labor market conditions and in particular of employment protection legislation as a determinant of bilateral Foreign Direct Investment flows to seven Central and Eastern European countries. Although our results indicate that countries characterized by low unit labor costs tend to attract more Foreign Direct Investment, we find no evidence suggesting that employment protection legislation matters in this context. This result also holds if we control for the riskiness of the host countries.

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Paper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2007-16.

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Date of creation: Oct 2007
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Handle: RePEc:jku:econwp:2007_16

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Related research
Keywords: Foreign Direct Investment; Central and Eastern Europe; Labor Market; Employment Protection;

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Find related papers by JEL classification:
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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  1. Wolfgang Ochel, 2005. "Concepts and Measurement of Labour Market Institutions," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 3(4), pages 40-55, 01. [Downloadable!]
  2. Agnès Bénassy-Quéré & Maylis Coupet & Thierry Mayer, 2007. "Institutional Determinants of Foreign Direct Investment," The World Economy, Blackwell Publishing, vol. 30(5), pages 764-782, 05. [Downloadable!] (restricted)
    Other versions:
  3. Kai Carstensen & Farid Toubal, 2003. "Foreign Direct Investment in Central and Eastern European Countries: A Dynamic Panel Analysis," Kiel Working Papers 1143, Kiel Institute for the World Economy. [Downloadable!]
    Other versions:
  4. Smarzynska, Beata & Spartareanu, Mariana, 2004. "Do foreign investors care about labor market regulations?," Policy Research Working Paper Series 3275, The World Bank. [Downloadable!]
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  5. Liu, Zhiqiang, 2002. "Foreign Direct Investment and Technology Spillover: Evidence from China," Journal of Comparative Economics, Elsevier, vol. 30(3), pages 579-602, September. [Downloadable!] (restricted)
  6. Egger, Peter & Winner, Hannes, 2005. "Evidence on corruption as an incentive for foreign direct investment," European Journal of Political Economy, Elsevier, vol. 21(4), pages 932-952, December. [Downloadable!] (restricted)
  7. Peter Egger, . "On the Problem of Endogenous Unobserved Effects in the Estimation of Gravity Models," WIFO Working Papers 132, WIFO. [Downloadable!]
  8. Agnès Bénassy-Quéré & Nicolas Gobalraja & Alain Trannoy, 2007. "Tax and public input competition," Economic Policy, CEPR, CES, MSH, vol. 22, pages 385-430, 04. [Downloadable!] (restricted)
  9. Haaland, J.I. & Wooton, I., 2000. "Multinational Firms: Easy Come, Easy Go?," Papers 19/00, Norwegian School of Economics and Business Administration-.
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  10. Demekas, Dimitri G. & Horvath, Balazs & Ribakova, Elina & Wu, Yi, 2007. "Foreign direct investment in European transition economies--The role of policies," Journal of Comparative Economics, Elsevier, vol. 35(2), pages 369-386, June. [Downloadable!] (restricted)
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