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Labor Market Rigidity And Foreign Direct Investment: The Case Of Europe

Author

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  • Mogab, J.
  • Kishan, R.
  • Vacaflores, D.E.

Abstract

This paper examines the relationship between labor market rigidity and FDI decisions by Europeans multi-nationals firms during 2004-2008. We use firm-level data for European Multinational Enterprises investment in 41 European countries during these four years. Using conditional fixed effect logit and Tobit estimations, we show that European MNEs generally respond to regulatory, gravity and firm specific indicators in the expected ways, but their responses to changes in labor market institutions are less consistent. We also find that the relationship between MNEs location decision and host country’s labor market institutional factors is sensitive to host country’s development stage and market integration with the EU countries.

Suggested Citation

  • 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.
    • Handle: RePEc:eaa:aeinde:v:13:y:2013:i:1_4
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    References listed on IDEAS

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    9. Diego E. Vacaflores, 2011. "Was Latin America Correct In Relying In Foreign Direct Investment To Improve Employment Rates?," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 11(2).
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    Cited by:

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    4. Jeongseok Song & Daecheon Yang & Soonwon Kwon, 2017. "Fdi Consequences Of Downward Wage–Cost Rigidities," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 62(05), pages 1223-1244, December.

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    More about this item

    Keywords

    Foreign Direct Investment; Labor Flexibility; Economic Integration; Trade and Labor Market Interactions.;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J80 - Labor and Demographic Economics - - Labor Standards - - - General
    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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