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The impact of territorially concentrated FDI on local labor markets: Evidence from the Czech Republic

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  • Dinga, Marián
  • Münich, Daniel

Abstract

This paper investigates the impact of a large and territorially concentrated foreign direct investment (FDI) inflow on local labor market outcomes in the Czech Republic. A conditional difference-in-differences technique is employed for an estimation of the impact and block bootstrapping is used for computing consistent standard errors. The results indicate a positive and statistically as well as economically significant effect of a large investment project on the local unemployment outflow rate, which is driven mainly by increases in the aggregate unemployment exit hazard rates for unemployment durations smaller than nine months. Subsequent to the investment, the unemployment rate decreased by 1.7Â percentage points and the employment rate increased by 3.7Â percentage points in the host district. However, the impact on long-term unemployed was negligible as the exit hazard rates for durations longer than nine months remain unchanged. Moreover, a simple cost-benefit analysis suggests that investment incentives paid from a state budget would pay off only in a horizon of twelve years.

Suggested Citation

  • Dinga, Marián & Münich, Daniel, 2010. "The impact of territorially concentrated FDI on local labor markets: Evidence from the Czech Republic," Labour Economics, Elsevier, vol. 17(2), pages 354-367, April.
  • Handle: RePEc:eee:labeco:v:17:y:2010:i:2:p:354-367
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    References listed on IDEAS

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    Cited by:

    1. Enrico Marelli & Laura Resmini & Marcello Signorelli, 2014. "The Effects Of Inward Fdi On Regional Employment In Europe," Romanian Journal of Regional Science, Romanian Regional Science Association, vol. 8(1), pages 1-23, JUNE.
    2. Schäffler, Johannes & Hecht, Veronika & Moritz, Michael, 2014. "Regional determinants of German FDI in the Czech Republic : evidence from a gravity model approach," IAB Discussion Paper 201403, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    3. Mina, Wasseem & Jaeck, Louis, 2015. "Labor Market Flexibility and FDI Flows: Evidence from Oil-Rich GCC and Middle Income Countries," MPRA Paper 62652, University Library of Munich, Germany.
    4. Hecht, Veronika, 2015. "Location choice of German multinationals in the Czech Republic : the importance of agglomeration economies," IAB Discussion Paper 201519, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    5. repec:bla:etrans:v:25:y:2017:i:4:p:593-623 is not listed on IDEAS
    6. Hale, Galina & Xu, Mingzhi, 2016. "FDI effects on the labor market of host countries," Working Paper Series 2016-25, Federal Reserve Bank of San Francisco.
    7. Marian Dinga, 2011. "The Role of Investment Incentives in Regional FDI Reallocation: A Regression-Discontinuity Approach," CERGE-EI Working Papers wp438, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

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