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“A panel data analysis of FDI and informal labor markets”

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Listed author(s):
  • Antonio Baez

    ()

    (Faculty of Economics, University of Barcelona)

Abstract

The objective of this paper is to examine whether informal labor markets affect the flows of Foreign Direct Investment (FDI), and also whether this effect is similar in developed and developing countries. With this aim, different public data sources, such as the World Bank (WB), and the United Nations Conference on Trade and Development (UNCTAD) are used, and panel econometric models are estimated for a sample of 65 countries over a 14 year period (1996-2009). In addition, this paper uses a dynamic model as an extension of the analysis to establish whether such an effect exists and what its indicators and significance may be. While the results shows that informal labor markets are significant and do positively affect the flow of FDI, these effects are felt up to a certain level of informality, above which the effect becomes negative. The results are similar for developed and developing countries and are robust to several checks.

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File URL: http://www.ub.edu/irea/working_papers/2014/201404.pdf
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Paper provided by University of Barcelona, Research Institute of Applied Economics in its series IREA Working Papers with number 201404.

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Length: 33 pages
Date of creation: Feb 2014
Date of revision: Feb 2014
Handle: RePEc:ira:wpaper:201404
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Keywords: Foreign Direct Investment; Informal labor markets; Institutions. JEL classification: F16; F23; J8; M5;

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  14. Hazel Parcon, 2008. "Labor Market Flexibility as a Determinant of FDI Inflows," Working Papers 200807, University of Hawaii at Manoa, Department of Economics.
  15. Rahmah Ismail & Ishak Yussof, 2003. "Labour market competitiveness and foreign direct investment: The case of Malaysia, Thailand and the Philippines," Economics of Governance, Springer, vol. 82(3), pages 389-402, September.
  16. Robert E. Lipsey, 2004. "Home- and Host-Country Effects of Foreign Direct Investment," NBER Chapters,in: Challenges to Globalization: Analyzing the Economics, pages 333-382 National Bureau of Economic Research, Inc.
  17. Clark Don P. & Highfill Jannett & de Oliveira Campino Jonas & Rehman Scheherazade S., 2011. "FDI, Technology Spillovers, Growth, and Income Inequality: A Selective Survey," Global Economy Journal, De Gruyter, vol. 11(2), pages 1-44, July.
  18. Markus Leibrecht & Johann Scharler, 2009. "How important is employment protection legislation for Foreign Direct Investment flows in Central and Eastern European countries?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(2), pages 275-295, 04.
  19. Julan Du & Yi Lu & Zhigang Tao, 2008. "FDI location choice: agglomeration vs institutions," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(1), pages 92-107.
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