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The Impact of Territorially Concentraced FDI on Local Labor Markets: Evidence from the Czech Republic

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  • Marian Dinga

Abstract

This 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.

Suggested Citation

  • Marian Dinga, 2008. "The Impact of Territorially Concentraced FDI on Local Labor Markets: Evidence from the Czech Republic," CERGE-EI Working Papers wp348, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
  • Handle: RePEc:cer:papers:wp348
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    File URL: http://www.cerge-ei.cz/pdf/wp/Wp348.pdf
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    References listed on IDEAS

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    1. James J. Heckman & Hidehiko Ichimura & Petra E. Todd, 1997. "Matching As An Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Oxford University Press, vol. 64(4), pages 605-654.
    2. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
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    5. Urmas Varblane & Tomasz Mickiewicz & Slavo Radosevic, 2000. "The Value Of Diversity: Foreign Direct Investmentand Employment In Central Europe During Economic Recovery," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 2, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    6. Elina Ribakova & Balázs Horváth & Dimitri G Demekas & Yi Wu, 2005. "Foreign Direct Investment in Southeastern Europe; How (and How Much) Can Policies Help?," IMF Working Papers 05/110, International Monetary Fund.
    7. Simon Burgess & Hélène Turon, 2005. "Unemployment dynamics in Britain," Economic Journal, Royal Economic Society, vol. 115(503), pages 423-448, April.
    8. Helland Eric & Tabarrok Alexander, 2004. "Using Placebo Laws to Test "More Guns, Less Crime"," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-9, January.
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    More about this item

    Keywords

    Labor market; unemployment; employment; foreign direct investment.;

    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, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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