FDI inflow effects on Western Balkan area's labour markets_10032020
Keywords:
average net wage, employment rate, foreign direct investments, linear mixed models, random effects
Abstract
Economic growth and labour market dependency on Foreign Direct Investments (FDI) inflow is very high in transition economies. This paper estimates the effects of FDI inflow on the employment rate and average net wages in Western Balkan economies in the period 2003–2017. The sample of economies was selected mainly because of the high legacy with FDI and unsaturated labour market. Presumably FDI inflow have positive impact on the employment rate and on average net wages in the Western Balkan countries. Employing linear mixed-effects models (LMM), the results indicate that FDI inflow changes has very low but positive and significant effects on the both changes in employment rate and in average net wages.
References
Anderson, C. J. (2013). Longitudinal Data Analysis via Linear Mixed Model. Department of Educational Psychology, University of Illinois, Urbana Champaign. USA. Unpublished.
Bartlett, W. (2007). Economic Transition in Serbia since 2000: Trends and Prospects. Journal of the Western Balkans Security Observer, 7–8, 29–37.
Bhandari, B. (2007). Effect of Inward Foreign Direct Investment on Income Inequality in Transition Countries. Journal of Economic Integration, 22(4), 888-928.
Bitzenis, A., & Marangos, J. (2007). Globalization and the Integration-Assisted Transition in Central and Eastern European Economies. Journal of Economic Issues, 41(2), 427-434. doi: 10.1080/00213624.2007.11507030
Brada, J. C., Kutan, A. M., & Yigit, T. M. (2006). The effects of transition and political instability on foreign direct investment inflows: Central Europe and the Balkans. Economics of Transition, 14(4), 649–680.
Bukowski, C. (2005). Slovenia’a Accession to the European Union: Domestic and Foreign Policy Consequences. Slovene Studies Journal, 25(1-2), 63-69.
Chandler, D. (2007). From Dayton to Europe. International Peacekeeping, 12(3), 336–349. doi: 10.1080/13533310500074077
Dabla-Norris, E., Honda, J., Lahreche, A., & Verdier, G. (2010). FDI Flows to Low-Income Countries: Global Drivers and Growth Implications. IMF Working Paper WP/10/132.
Domazet, A. (2016). Foreign direct investment in Bosnia and Herzegovina: From the delusions of neoliberalism to drivers of economic growth. Posebna izdanja Akademije nauka i umjetnosti BiH, 2, 126-145.
Driffield, N., Girma, S., Henry, M., & Taylor, K. (2010). Wage inequality, linkages and FDI. IZA Discussion Paper No. 4722.
Estrin, S., & Uvalic, M. (2013). Foreign direct investment into transition economies: Are the Balkans different? LEQS Discussion paper No. 64/2013.
Figini, P., & Gorg, H. (2006). Does foreign direct investment affect wage inequality? An empirical investigation. IZA Discussion Paper No. 2336.
Gopinath, M., & Chen, W. (2003). Foreign direct investment and wages: a cross-country analysis. Journal of International Trade & Economic Development, 12(3), 285–309. doi: 10.1080/0963819032000132067
Grahovac, D., & Softic, S. (2017). Impact of the FDI on Unemployment rate in countries of West Balkan. Review of innovation and competitiveness, 3(2), 65-82.
Hadzic, M., & Pavlovic, P. (2011). How to Overcome (SME) Crisis: Serbian Case. Acta Polytechnica Hungarica, 8(1), 61-80.
Hale, G., & Xu, M. (2016). FDI effects on the labor market of host countries. Federal Reserve Bank of San Francisco Working Paper 2016-25. Retrieved from: http://www.frbsf.org/economic-research/files/wp2016-25.pdf
Halmos, K. (2011). The Effect of FDI, Exports and GDP on Income Inequality in 15 Eastern European Countries. Acta Polytechnica Hungarica, 8(1), 123-136.
Heck, H. R., Thomas L. S., & Tabata, N. L. (2014). Multilevel and Longitudinal Modeling with IBM SPSS. Routledge, New York and London.
Jude, C., & Silaghi, I. P. M. (2016). Employment effects of foreign direct investment: New evidence from Central and Eastern European countries. International Economics, 145, 32-49.
Kekic, L. (2006). Foreign direct investment in the Balkans: recent trends and prospects. Southeast European and Black Sea Studies, 5(2), 171-190. Doi. 10.1080/14683850500122687
Kekic, L. (2011). The global economic crisis and FDI flows to emerging markets. In Karl P. Sauvant, Lisa Sachs, Kenneth Davies, and Ruben Zandvliet (eds.), FDI perspectives: Issues in international investment (2-6). New York: Vale Columbia Center on Sustainable International Investment.
Krammer, S. M. S. (2010). International R&D spillovers in emerging markets: The impact of trade and foreign direct investment. Journal of International Trade and Economic Development, 19(4), 591-623. doi: 10.1080/09638190902792464
Kurtovic, S., Talovic, S., & Dacic, L. (2015). Panel cointegration analysis of Foreign Direct Investments and Average Net Wages: The case of four Western Balkan Countries. G. & L. E. R. 19(1), 1-36.
Melnyk, L., Kubatko, O., & Pysarenko, S. (2014). The impact of foreign direct investment on economic growth: case of post communism transition economies. Problems and Perspectives in Management, 12(1), 17-24.
Neto, P., Brandao, A., & Cerqueria, A. (2008). The impact of FDI, Cross Border Merger and Acquisitions and Greenfiled Investments on Economic Growth. Journal of Business Strategy, 7(4), 24–44.
Nikolic, D., & Bodroza, D. (2012). Positioning and re-positioning of national brand of Serbia in order to increase exports, foreign direct investments and tourism development. In Joao S. Andrade, Marta C. N. Simoes, Ivan Stosic, Dejan Eric, Hasan Hanic (eds.), Managing Structural Changes: Trends and Requirements (488-505). Belgrade: IES.
OECD. (2008). OECD Benchmark Definition of Foreign Direct Investment, 4th edition. OECD.
Peric, M. (2019). Impact of FDI inflow on employment and average wage in Serbia. Management: Journal of Sustainable Business and Management Solutions in Emerging Economies, forthcoming. doi: 10.7595/management.fon.2019.0007
Peric, M., & Filipovic, S. (2018). The impact of the determinants of export on the export in the Republic of Serbia. Industrija, 46(2), 151–171. doi: 10.5937/industrija46-17408
Pitic, G., Savic, N., Barjaktarovic, L., & Konjikusic, S. (2014). The impact of different forms of Foreign Capital Inflow on GDPpc in CEE Countries during the Crisis up to 2012. Eurasian Journal of Economics and Finance, 2(2), 70-77. doi: 10.15604/ejef.2014.02.02.006
Popovic, G., & Eric, O. (2018). Economic development of the Western Balkans and European Union investments. Economic Research, 31(1), 1539–1556. doi. 10.1080/1331677X.2018.1498009
Sabic, D., Vujadinovic, S., Milincic, M., Golic, R., Stojkovic, S., Joksimovic, M., Filipovic, D., & Secerov, V. (2012). The Impact of FDI on the Transition Economy in Serbia – Changes and Challenges. Acta Polytechnica Hungarica, 9(3), 65-84.
Savic, N., Barjaktarovic, L., & Konjikusic, S. (2014). Foreign Capital Inflow and GDPpc in CEE Countries. Actual Problems of Economics, 3(153), 54-65.
Stanisic, N. (2008). Do Foreign Direct Investments increase the economic growth of Southeastern European Transition Economies? South-Eastern Europe Journal of Economics, 42(1), 29-38.
Szondi, G. (2007). The role and challenges of country branding in transition countries: The Central and Eastern European experience. Place Branding and Public Diplomacy, 3(1), 8–20. doi: 10.1057/palgrave.pb.6000044
Tanna, S., Li, C., & De Vita, G. (2018). The role of external debt in the foreign direct investment–growth relationship. International Journal of Finance and Economics, 23(4), 393-412. doi: 10.1002/ijfe.1628
Taylor, K., & Driffield, N. (2005). Wage Inequality and the Role of Multinationals: Evidence from UK Panel Data. Labour Economics, 12(2), 223-249. doi: 10.1016/j.labeco.2003.11.003
UNCTAD. (2011). World Investment report: Non-Equity Modes of International Production and Development. New York and Geneva: UN.
UNCTAD. (2018). World Investment Report: Investment and new industrial polices. New York and Geneva: UN.
Vesaite, R. (2014). FDI from European Union to Western Balkan Countires: is the economic development being intensified in the region? Institut Universitari d'Estudis Europeus.
Todorova, S. M. (2018). Foreign Investment Inflows to Former Socialist Countries in the Balkans: Mapping Global Capitalism. Interventions: International Journal of Postcolonial Studies, 20(6), 814-831. DOI: 10.1080/1369801X.2018.1492953
Zdravkovic, A., & Martinovic, B. A. (2016). To which extent did the FDI contribute to employment growth in transition countries? In International Scientific Conference: Impact of Economic Policies on Attaining Resilient Growth, October 27th, Belgrade.
Zulfiu, M. A. (2014). Simulation Analysis of the Effects of Increased Foreign Ownership on Wage. Academicus International Scientific Journal, 9, 140–158. doi: 10.7336/academicus.2014.09.10
Bartlett, W. (2007). Economic Transition in Serbia since 2000: Trends and Prospects. Journal of the Western Balkans Security Observer, 7–8, 29–37.
Bhandari, B. (2007). Effect of Inward Foreign Direct Investment on Income Inequality in Transition Countries. Journal of Economic Integration, 22(4), 888-928.
Bitzenis, A., & Marangos, J. (2007). Globalization and the Integration-Assisted Transition in Central and Eastern European Economies. Journal of Economic Issues, 41(2), 427-434. doi: 10.1080/00213624.2007.11507030
Brada, J. C., Kutan, A. M., & Yigit, T. M. (2006). The effects of transition and political instability on foreign direct investment inflows: Central Europe and the Balkans. Economics of Transition, 14(4), 649–680.
Bukowski, C. (2005). Slovenia’a Accession to the European Union: Domestic and Foreign Policy Consequences. Slovene Studies Journal, 25(1-2), 63-69.
Chandler, D. (2007). From Dayton to Europe. International Peacekeeping, 12(3), 336–349. doi: 10.1080/13533310500074077
Dabla-Norris, E., Honda, J., Lahreche, A., & Verdier, G. (2010). FDI Flows to Low-Income Countries: Global Drivers and Growth Implications. IMF Working Paper WP/10/132.
Domazet, A. (2016). Foreign direct investment in Bosnia and Herzegovina: From the delusions of neoliberalism to drivers of economic growth. Posebna izdanja Akademije nauka i umjetnosti BiH, 2, 126-145.
Driffield, N., Girma, S., Henry, M., & Taylor, K. (2010). Wage inequality, linkages and FDI. IZA Discussion Paper No. 4722.
Estrin, S., & Uvalic, M. (2013). Foreign direct investment into transition economies: Are the Balkans different? LEQS Discussion paper No. 64/2013.
Figini, P., & Gorg, H. (2006). Does foreign direct investment affect wage inequality? An empirical investigation. IZA Discussion Paper No. 2336.
Gopinath, M., & Chen, W. (2003). Foreign direct investment and wages: a cross-country analysis. Journal of International Trade & Economic Development, 12(3), 285–309. doi: 10.1080/0963819032000132067
Grahovac, D., & Softic, S. (2017). Impact of the FDI on Unemployment rate in countries of West Balkan. Review of innovation and competitiveness, 3(2), 65-82.
Hadzic, M., & Pavlovic, P. (2011). How to Overcome (SME) Crisis: Serbian Case. Acta Polytechnica Hungarica, 8(1), 61-80.
Hale, G., & Xu, M. (2016). FDI effects on the labor market of host countries. Federal Reserve Bank of San Francisco Working Paper 2016-25. Retrieved from: http://www.frbsf.org/economic-research/files/wp2016-25.pdf
Halmos, K. (2011). The Effect of FDI, Exports and GDP on Income Inequality in 15 Eastern European Countries. Acta Polytechnica Hungarica, 8(1), 123-136.
Heck, H. R., Thomas L. S., & Tabata, N. L. (2014). Multilevel and Longitudinal Modeling with IBM SPSS. Routledge, New York and London.
Jude, C., & Silaghi, I. P. M. (2016). Employment effects of foreign direct investment: New evidence from Central and Eastern European countries. International Economics, 145, 32-49.
Kekic, L. (2006). Foreign direct investment in the Balkans: recent trends and prospects. Southeast European and Black Sea Studies, 5(2), 171-190. Doi. 10.1080/14683850500122687
Kekic, L. (2011). The global economic crisis and FDI flows to emerging markets. In Karl P. Sauvant, Lisa Sachs, Kenneth Davies, and Ruben Zandvliet (eds.), FDI perspectives: Issues in international investment (2-6). New York: Vale Columbia Center on Sustainable International Investment.
Krammer, S. M. S. (2010). International R&D spillovers in emerging markets: The impact of trade and foreign direct investment. Journal of International Trade and Economic Development, 19(4), 591-623. doi: 10.1080/09638190902792464
Kurtovic, S., Talovic, S., & Dacic, L. (2015). Panel cointegration analysis of Foreign Direct Investments and Average Net Wages: The case of four Western Balkan Countries. G. & L. E. R. 19(1), 1-36.
Melnyk, L., Kubatko, O., & Pysarenko, S. (2014). The impact of foreign direct investment on economic growth: case of post communism transition economies. Problems and Perspectives in Management, 12(1), 17-24.
Neto, P., Brandao, A., & Cerqueria, A. (2008). The impact of FDI, Cross Border Merger and Acquisitions and Greenfiled Investments on Economic Growth. Journal of Business Strategy, 7(4), 24–44.
Nikolic, D., & Bodroza, D. (2012). Positioning and re-positioning of national brand of Serbia in order to increase exports, foreign direct investments and tourism development. In Joao S. Andrade, Marta C. N. Simoes, Ivan Stosic, Dejan Eric, Hasan Hanic (eds.), Managing Structural Changes: Trends and Requirements (488-505). Belgrade: IES.
OECD. (2008). OECD Benchmark Definition of Foreign Direct Investment, 4th edition. OECD.
Peric, M. (2019). Impact of FDI inflow on employment and average wage in Serbia. Management: Journal of Sustainable Business and Management Solutions in Emerging Economies, forthcoming. doi: 10.7595/management.fon.2019.0007
Peric, M., & Filipovic, S. (2018). The impact of the determinants of export on the export in the Republic of Serbia. Industrija, 46(2), 151–171. doi: 10.5937/industrija46-17408
Pitic, G., Savic, N., Barjaktarovic, L., & Konjikusic, S. (2014). The impact of different forms of Foreign Capital Inflow on GDPpc in CEE Countries during the Crisis up to 2012. Eurasian Journal of Economics and Finance, 2(2), 70-77. doi: 10.15604/ejef.2014.02.02.006
Popovic, G., & Eric, O. (2018). Economic development of the Western Balkans and European Union investments. Economic Research, 31(1), 1539–1556. doi. 10.1080/1331677X.2018.1498009
Sabic, D., Vujadinovic, S., Milincic, M., Golic, R., Stojkovic, S., Joksimovic, M., Filipovic, D., & Secerov, V. (2012). The Impact of FDI on the Transition Economy in Serbia – Changes and Challenges. Acta Polytechnica Hungarica, 9(3), 65-84.
Savic, N., Barjaktarovic, L., & Konjikusic, S. (2014). Foreign Capital Inflow and GDPpc in CEE Countries. Actual Problems of Economics, 3(153), 54-65.
Stanisic, N. (2008). Do Foreign Direct Investments increase the economic growth of Southeastern European Transition Economies? South-Eastern Europe Journal of Economics, 42(1), 29-38.
Szondi, G. (2007). The role and challenges of country branding in transition countries: The Central and Eastern European experience. Place Branding and Public Diplomacy, 3(1), 8–20. doi: 10.1057/palgrave.pb.6000044
Tanna, S., Li, C., & De Vita, G. (2018). The role of external debt in the foreign direct investment–growth relationship. International Journal of Finance and Economics, 23(4), 393-412. doi: 10.1002/ijfe.1628
Taylor, K., & Driffield, N. (2005). Wage Inequality and the Role of Multinationals: Evidence from UK Panel Data. Labour Economics, 12(2), 223-249. doi: 10.1016/j.labeco.2003.11.003
UNCTAD. (2011). World Investment report: Non-Equity Modes of International Production and Development. New York and Geneva: UN.
UNCTAD. (2018). World Investment Report: Investment and new industrial polices. New York and Geneva: UN.
Vesaite, R. (2014). FDI from European Union to Western Balkan Countires: is the economic development being intensified in the region? Institut Universitari d'Estudis Europeus.
Todorova, S. M. (2018). Foreign Investment Inflows to Former Socialist Countries in the Balkans: Mapping Global Capitalism. Interventions: International Journal of Postcolonial Studies, 20(6), 814-831. DOI: 10.1080/1369801X.2018.1492953
Zdravkovic, A., & Martinovic, B. A. (2016). To which extent did the FDI contribute to employment growth in transition countries? In International Scientific Conference: Impact of Economic Policies on Attaining Resilient Growth, October 27th, Belgrade.
Zulfiu, M. A. (2014). Simulation Analysis of the Effects of Increased Foreign Ownership on Wage. Academicus International Scientific Journal, 9, 140–158. doi: 10.7336/academicus.2014.09.10
Published
2020/10/14
Section
Original Scientific Paper
