The Balkan Paradox: Are Wages and Labour Productivity Significant Determinants of FDI Inflows?

Maja Bacovic, Danijela Jacimovic, Milena Lipovina Bozovic and Maja Ivanovic

Journal of Balkan and Near Eastern Studies, 2021, vol. 23, issue 1, 144-162

Abstract: Although middle-income Balkan countries have attracted substantial FDI inflows, the level of that inflow is still significantly lower than the European average, with no visible redirection towards the Balkans. Both wages and labour productivity have had a significant impact on FDI inflows in European Union (EU) countries. This research aims to explore the significance of those variables in the countries of the Balkans. We have found that, in Balkan countries, FDI inflows respond negatively to shocks in labour productivity, which is contrary to the experience of EU countries. In EU countries, growth in gross wages has a negative impact on FDI inflows, while in Balkan countries, we found a paradoxical scenario, in that increased wages actually have a positive impact on FDI inflows.

Date: 2021
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DOI: 10.1080/19448953.2020.1818039

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