Economics at your fingertips  

The impact of employment protection on FDI at different stages of economic development

Sulistiyo K. Ardiyono and Arianto Patunru

The World Economy, 2022, vol. 45, issue 12, 3679-3714

Abstract: There has been much debate on how to design employment protection regulations that balance the need to attract foreign direct investment (FDI) on the one hand and to protect workers' rights on the other hand. This study explores this ‘dilemma’, using a multi‐country dataset from 2003 to 2015 and treating hiring and firing regulation (HFR) and the other explanatory variables as endogenous. The findings indicate that flexible HFR is essential for FDI promotion in the early stages of economic development of a country, but the impact of labour market flexibility on FDI gradually decreases and eventually turns statistically insignificant with economic advancement. In other words, a flexible HFRs are more important for developing countries, but such flexibility does not have to be sustained in a ‘race to the bottom’ manner: once a country reaches higher income levels, it has more room to focus on labour standards to protect workers without compromising on the attractiveness of the country for FDI.

Date: 2022
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)

Related works:
Working Paper: The impact of employment protection on FDI at different stages of economic development (2021) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0378-5920

Access Statistics for this article

The World Economy is currently edited by David Greenaway

More articles in The World Economy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2023-03-09
Handle: RePEc:bla:worlde:v:45:y:2022:i:12:p:3679-3714