Does the Impact of Employment Protection Legislation on Foreign Direct Investment Differ by the Skill Intensity of Locations? An Empirical Investigation

Christian Bellak (with Markus Leibrecht), Vienna University of Economics and Business

In line with previous literature we find that strict employment protection deters foreign direct investment. This finding is consistent with the view that rigid labor markets result in high adjustment and exit costs which discourage firm investment. Moreover, our results also show that the deterrent effect of rigid labor markets depends on the skill-intensity of a location, a result which has not been established empirically so far.


Keywords: foreign direct investment; labor market; economic policy

JEL classification: J41, J8, F21

Research Areas: Labour, Migration and Income Distribution