THE IMPACT OF FOREIGN DIRECT INVESTMENT ON EMPLOYMENT IN HOST COUNTRIES: THE CASE OF CENTRAL AND EASTERN EUROPE

Abstract

The relationship between foreign direct investment (FDI) and host countries is a complex, multi-faceted one. One of the issues that recently gained more attention in the literature is the impact of FDI on employment. The aim of this paper is to investigate the way in which FDI impacts the labor force in the host countries and to reveal the factors that determine the outcome of this relationship. Based on a thorough desktop research, the approach of the paper is twofold: both the quantitive impact and the qualitative impact of FDI on employment are analyzed. The main findings are that quantitatively, the result is largely determined by the type of FDI, while qualitatively, most effects (on productivity, wages, and training) are positive. The impact of FDI on employment is analysed further on the special case of Central and Eastern European countries. These went through a transition period in which former state-owned companies were privatized with the help of foreign investors, giving rise to specific effects. The conclusions highlight the positive and the negative aspects associated with the impact of FDI on employment, turning into recommendations which may become a valuable toolokit for policy-makers in host countries

Keywords

• foreign direct investment
• employment
• host countries
• labor