Labor Costs and Foreign Direct Investment: A Panel VAR Approach

Labor Costs and Foreign Direct Investment: A Panel VAR Approach

This paper examines the endogenous interaction between labor costs and Foreign Direct Investment (FDI) in the OECD countries via the Panel VAR approach under system GMM estimates for the period 1995–2009. The available data allows identifying the relevance of the components of labor costs, and allow...

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Bibliographic Details
Main Authors: Bahar Bayraktar-Sağlam, Selin Sayek Böke
Format: Article
Language:English
Published: MDPI AG 2017-09-01
Series:Economies
Subjects:
foreign direct investment
labor cost
panel VAR
Impulse Response Functions
Online Access:https://www.mdpi.com/2227-7099/5/4/36
Description
Summary:This paper examines the endogenous interaction between labor costs and Foreign Direct Investment (FDI) in the OECD countries via the Panel VAR approach under system GMM estimates for the period 1995–2009. The available data allows identifying the relevance of the components of labor costs, and allows a detailed analysis across different sectors. Empirical findings have revealed that sectoral composition of FDI and the decomposition of labor costs play a significant role in investigating the dynamic association between labor costs and FDI. Further, results suggest that labor market policies should focus on productivity-enhancing tools in addition to price hindering tools.
ISSN:2227-7099

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