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Labor Market Flexibility as a Determinant of FDI Inflows

Author

Listed:
  • Hazel Parcon

    (Department of Economics, University of Hawaii at Manoa)

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.

Suggested Citation

  • Hazel Parcon, 2008. "Labor Market Flexibility as a Determinant of FDI Inflows," Working Papers 200807, University of Hawaii at Manoa, Department of Economics.
  • Handle: RePEc:hai:wpaper:200807
    as

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    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_08-7.pdf
    File Function: First version, 2008
    Download Restriction: no

    References listed on IDEAS

    as
    1. Bruce Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," Atlantic Economic Journal, Springer;International Atlantic Economic Society, pages 383-403.
    2. 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.
    3. Bruce Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," Atlantic Economic Journal, Springer;International Atlantic Economic Society, pages 383-403.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. repec:wsi:serxxx:v:62:y:2017:i:05:n:s0217590815501131 is not listed on IDEAS
    2. 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.
    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. Per Skedinger, 2010. "Employment Protection Legislation," Books, Edward Elgar Publishing, number 13686, April.
    5. repec:eee:riibaf:v:42:y:2017:i:c:p:630-644 is not listed on IDEAS
    6. 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.

    More about this item

    Keywords

    foreign direct investment; labor market flexibility;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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