The Effect of Labor Market Institutions on FDI Inflows

다국어 초록 (Multilingual Abstract)

This study examines the impact of strengthening employment protection legislation, the structure of collective bargaining (centralization and coordination) and other labor market variables (national levels of unionization, strike levels and tax wedges on labor income) on a country's FDI inflows. Examining 29 OECD nations, our statistical analysis shows that strict EPL, which increases labor market rigidity, is usually associated with lower levels of FDI shares. Japanese investors are more sensitive to employment protection measures in choosing destinations for FDI than others. A 1-percentage-point increase in EPL causes a decrease of about 4.2 percent to Japan's FDI share, compared to the decrease of 2.2 percent that results in the worldwide share. Finally, we discuss the implications of the recent employment protection policies in Korea that focus only on the interests of "inside" labor, neglecting the interests of "outside" labor (unemployed and future labor), as well as reducing FDI inflows. Thus, policies for spending on outside labor and promoting entrepreneurship are necessary for national welfare as well as FDI inflows to increase.

목차 (Table of Contents)

• Ⅰ. Introduction
• Ⅱ. Labor Market Institutions and Economic Outcomes
• Ⅲ. The Effects of labor Market Institutions on FDI Inflows
• Ⅳ. Implications and Discussions
• References