Do Foreign Investors Care AboutLabor Market Regulations?

Spartareanu, Mariana ; Smarzynska Javorcik, Beata

World Bank, Washington, D.C.

关键词: ABATEMENT COSTS;    ACCOUNTING;    CAPITAL FLOWS;    CORRUPTION;    DEVELOPMENT INDICATORS;   

DOI  :  10.1596/1813-9450-3275
RP-ID  :  WPS3275

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

The authors take a new look at theregulatory determinants of foreign direct investment (FDI)by asking whether labor market flexibility affects FDI flowsacross 25 Western and Eastern European countries. Theiranalysis is based on firm level data on new investmentsduring the 1999-2001 period. The authors employ a variety oflabor market flexibility measures that capture differentaspects of labor laws along with a comprehensive set ofcontrols for business climate characteristics. Indices oflabor market regulations reflect the flexibility ofindividual and collective dismissals, the length of thenotice period, and the required severance payment. Theresults suggest that greater flexibility in the hostcountry's labor market relative to that in theinvestor's home country is associated with larger FDIinflows, and this effect is found to be stronger in the caseof transition economies. The findings indicate that as thelabor market flexibility in the host country increases frominflexible (for example, Slovakia) to flexible (for example,Hungary), the volume of investment increases by between 14and 18 percent. FDI in service sectors appears to be moreaffected than investments in manufacturing.