Advanced Search
MyIDEAS: Login

Employment Effects of Foreign Direct Investment in Central and Eastern Europe

Contents:

Author Info

  • Ingo Geishecker
  • Gabor Hunya

    () (The Vienna Institute for International Economic Studies, wiiw)

Abstract

The paper starts with a discussion of the development of the number of manufacturing sector jobs in the framework of economic transformation and industrial restructuring in Central and Eastern Europe. Over the past decade, domestically-owned manufacturing companies reduced the number employed while foreign-owned enterprises expanded that number. Job losses due to FDI have resulted from restructuring of privatized state-owned companies. A reduction of employment has also resulted from foreign companies cutting domestic supplier linkages after taking over state-owned enterprises. A database with indicators of foreign affiliates allows to identify countries and industries with various levels of foreign penetration and employment development. Foreign affiliates show higher labour productivity and better capital endowment and use more up-to-date technology than domestic companies; as a result, they tend to increase the performance in the host economy as a whole. Ownership-specific differences in productivity are clearly reflected in relative wages. Young skilled workers employed by foreign enterprises have higher wages relative to both their unskilled and skilled older colleagues and also relative to their counterparts in domestic firms. The more efficient matching of new technologies and new skills in foreign than domestic enterprises has benefited younger generations. A major question for the future is whether the present high regional concentration of FDI within the countries is likely to diminish. Agglomeration effects work against this happening, while improvements in transport and telecommunications make it more feasible. Thus, for instance, larger towns in peripheral regions have started receiving more FDI after becoming accessible by motorway. In the second part of the paper, empirical results from a gravity model are discussed; these suggest that FDI in non-manufacturing sectors tends to be of a horizontal type, while this is less the case in manufacturing. With a modest pace of convergence towards the level of GDP per head in the EU-15, non-manufacturing FDI is likely to remain constant or even decline, except in the Czech Republic, where non-manufacturing FDI would grow at a similar rate as in manufacturing. With stronger convergence, FDI in non-manufacturing is likely to show more robust growth. Further econometric analysis suggests that FDI is a significant determinant of the skill composition in the new EU members and is biased against skilled manual workers (i.e. FDI results in more employment of high-skill non-manual workers and low-skill workers). The magnitude of this effect is, however, modest and partly offset by other factors.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.wiiw.ac.at/modPubl/download.php?publ=RR321
Download Restriction: no

Bibliographic Info

Paper provided by The Vienna Institute for International Economic Studies, wiiw in its series wiiw Research Reports with number 321.

as in new window
Length: 33 pages including 11 Tables and 2 Figures
Date of creation: Aug 2005
Date of revision:
Publication status: Published as wiiw Research Report
Handle: RePEc:wii:rpaper:rr:321

Contact details of provider:
Postal: Rahlgasse 3, A-1060 Vienna
Phone: (+43-1) 533 66 10
Fax: (+43-1) 533 66 10-50
Email:
Web page: http://www.wiiw.ac.at
More information through EDIRC

Order Information:
Web: http://wiiw.ac.at

Related research

Keywords: FDI; employment; EU enlargement;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Bruce A. Blonigen & Ronald B. Davies & Keith Head, 2002. "Estimating The Knowledge-Capital Model of the Multinational Enterprise: Comment," University of Oregon Economics Department Working Papers 2002-13, University of Oregon Economics Department, revised 01 Mar 2002.
  2. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
  3. Horstmann, Ignatius J & Markusen, James R, 1987. "Strategic Investments and the Development of Multinationals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 109-21, February.
  4. Figini, Paolo & Görg, Holger, 1999. "Multinational companies and wage inequality in the host country: the case of Ireland," Open Access publications from Kiel Institute for the World Economy info:hdl:10419/2344, Kiel Institute for the World Economy.
  5. Blomström, Magnus & Kokko, Ari, 2003. "The Economics of Foreign Direct Investment Incentives," CEPR Discussion Papers 3775, C.E.P.R. Discussion Papers.
  6. E Berman & J Bound & Stephen Machin, 1997. "Implications of Skill-Biased Technological Change: International Evidence," CEP Discussion Papers dp0367, Centre for Economic Performance, LSE.
  7. James R. Markusen, 1997. "Trade versus Investment Liberalization," NBER Working Papers 6231, National Bureau of Economic Research, Inc.
  8. Markusen, James R. & Venables, Anthony J., 1998. "Multinational firms and the new trade theory," Journal of International Economics, Elsevier, vol. 46(2), pages 183-203, December.
  9. Hans-Werner Sinn & Alfons J. Weichenrieder, 1997. "Foreign direct investment, political resentment and the privatization process in eastern Europe," Economic Policy, CEPR & CES & MSH, vol. 12(24), pages 177-210, 04.
  10. Konings, Jozef, 2004. "The employment effects of foreign direct investment," EIB Papers 4/2004, European Investment Bank, Economics Department.
  11. Joze Mencinger, 2003. "Does Foreign Direct Investment Always Enhance Economic Growth?," Kyklos, Wiley Blackwell, vol. 56(4), pages 491-508, November.
  12. Nathan Sheets, 1996. "Capital flight from the countries in transition: Some empirical evidence," Journal of Policy Reform, Taylor and Francis Journals, vol. 1(3), pages 259-277.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Onaran, Ozlem & Stockhammer, Engelbert, 2008. "The effect of FDI and foreign trade on wages in the Central and Eastern European Countries in the post-transition era: A sectoral analysis for the manufacturing industry," Structural Change and Economic Dynamics, Elsevier, vol. 19(1), pages 66-80, March.
  2. VINTILA DENISIA & Popescu Raluca Georgiana, 2012. "The Effects Of Foreign Direct Investments On Employment In Central And Eastern Europe. Focus On Romania And Poland," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 81-87, July.
  3. Özlem Onaran, 2008. "Jobless Growth in the Central and Eastern European Countries," Working Papers wp165, Political Economy Research Institute, University of Massachusetts at Amherst.
  4. Sandrine Levasseur, 2006. "Convergence and FDI in an enlarged EU: what can we learn from the experience of cohesion countries for the CEECS?," Documents de Travail de l'OFCE 2006-12, Observatoire Francais des Conjonctures Economiques (OFCE).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wii:rpaper:rr:321

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Customer service).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.