Do Foreign Investors Care about Labor Market Regulations?

By B. Javorcik, Mariana Spatareanu. 2004

216 citations recorded by the source corpus.

This study investigates whether labor market flexibility affects foreign direct investment (FDI) flows across 19 Western and Eastern European countries. The analysis uses firm level data on new investments undertaken in the period 1998–2001. The study employs a variety of proxies for labor market regulations reflecting the flexibility of individual and collective dismissals, the length of the notice period and the required severance payment along with controls for business climate characteristics. The results suggest that greater flexibility in the host country’s labor market in absolute terms or relative to that in the investor’s home country is associated with larger FDI inflows.

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/787e2ce4e2a149d2a1bb7a1ae54c9327c9b82d22

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Citations in the corpus

State-owned MNCs and host country expropriation risk: The role of home state soft power and economic gunboat diplomacy (2014, background): “Past studies have demonstrated that these factors influence the decisions on, and the scale of, FDI (Asiedu & Esfahani 2001; Buch, Kleinert, Lipponer, & Toubal, 2005; Javorcik & Spatareanu, 2005).”
Economic upgrading through global value chain participation: which policies increase the value-added gains? (2017, background): “Higher absolute and relative labor market flexibility than in the foreign investor’s home 11 country seems to have a positive effect on the chances of securing initial foreign investment (Javorcik and Spatareanu 2005).”
Globalization and the Right to Free Association and Collective (2005, unknown): “However, Javorcik and Spatareanu (2004), using firm-level data, find that firms in Eastern European countries with lower labor standards in terms of flexibility of individual and collective dismissals, the length of the notice period, and the required severance payment, received more FDI from…”
Institutions and inflows of foreign direct investment: a fuzzy-set analysis (2008, background): “In a recent study, however, Javorcik and Spatareanu (2004) provided an exam ination of labour market flexibility influences on FDI flows in western and eastern European coun tries.”
A Race to the Bottom in Labour Standards? An Empirical Investigation (2011, background): “Evidence of FDI being deterred by labor standards is provided by Dewit et al. (2009), Görg (2002) and Javorcik and Spatareanu (2005).”