Relationship of Labour Costs and Labour Productivity with Foreign Direct Investment in the V4 Countries

Author(s):  
Jarmila Hudakova ◽  
Viera Papcunova ◽  
Michaela Stubnova ◽  
Marta Urbanikova

The free movement of capital brings us increased interest but also a struggle for a foreign investor among individual countries. Four Central European countries joined their forces and created the Visegrad Group. The Visegrad Group (V4) represents an informal grouping of 4 Central European countries – the Czech Republic, Hungary, the Republic of Poland and the Slovak Republic. It is a lively and informal regional structure of 4 EU member states, which share the same values, have a common history, culture and geographical status. These countries work closely together; however, on the other hand, they also compete with each other. After the accession of these countries to the European Union (in 2004), there is a gradual convergence of these economies towards the original EU countries. The gradual convergence of prices of goods and services in these countries also causes the population's demand for growth in wages and salaries, which leads to an increase in the total labour costs. Labour productivity in these countries is on the rise, but still lags behind the EU average. Foreign direct investment is the driving force of any economy. In this context, we were interested in the relationship between labour costs and labour productivity in relation to foreign investment. It is important to see whether rising labour costs and lower labour productivity can lead to a slowdown in foreign direct investment inflows. Keywords: labour costs, labour productivity, foreign direct investment, countries V4

2018 ◽  
Vol 24 (5) ◽  
pp. 1955-1978 ◽  
Author(s):  
Weihua Su ◽  
Dongcai Zhang ◽  
Chonghui Zhang ◽  
Josef Abrhám ◽  
Mihaela Simionescu ◽  
...  

Considering the role of foreign direct investment (FDI) inflows in the sustainable development of a country, the main aim of this paper is to identify some macroeconomic factors that positively or negatively influence FDI in Visegrad group countries after the European Union (EU) enlargement in 2004. We employed two types of approaches in our analysis: i) time series and ii) panel data approach. According to the generalized ridge regressions estimated in Bayesian framework, the perceived corruption was a factor that influenced FDI in all the countries. In Poland, Czech Republic and Slovakia corruption came through as a serious obstacle for FDIs since 2005, but this was not the case for Hungary. Even if Hungary is perceived as a country with high influence, foreign investors seem no to care about this fact and are more interested in the quality of human resources and the possibility to increase exports. Our panel approach based on a panel ARDL model identified a significant relationship between FDI, corruption index and labour force with advanced education however this causality was only detected in the long run. According to the Granger causality in panel, the attraction of FDI inflows succeeded in generating changes in total tax rate, but the issues related to corruption were not reduced at an acceptable level for foreign investors in Poland, Slovakia, and the Czech Republic.


2019 ◽  
Vol 13 (1) ◽  
pp. 31-48
Author(s):  
Onvara Vadhanavisala

Abstract A quarter of a century ago, the Soviet Union dissolved and the Cold War ended. Now the current political era involves a broad challenge to liberal democracy in the European Union. Central European countries such as the Czech Republic, Hungary, the Republic of Poland, and the Slovak Republic (‘the Visegrád Group’) joined the EU in 2004 with the hope that the post-Cold War era would be one of peace and stability in Europe, including (most importantly) the expansion of Europe’s democracy. A turning point came in 2014, however, when the Syrian refugee crisis hit the EU and caused a political ‘about face’. The European refugee and migrant crisis have strengthened right-wing populism among the European countries, including the Visegrád group. Obviously there are certainly similarities between the populist rhetoric of Hungary’s ruling party, Fidesz, and the Law and Justice party (known as PiS) which is governing the Republic of Poland. The two countries appear to be following the same path of becoming ‘illiberal democratic’ states. The templates of authoritarianism which both countries have adopted involve the following: the restriction of civil society and the independence of the media, control of the judiciary and the court system, together with the transformation of the constitutional framework and electoral law in order to consolidate power. This paper analyses two examples of authoritarian populist leaders: first, Viktor Orbán, the Prime Minister of Hungary of the Fidesz Party and, second, Jarosław Kaczyński, a leader of the Law and Justice Party (PiS) in Poland. A brief description of each is provided as a background for the discussion which follows.


2013 ◽  
Vol 16 (2) ◽  
pp. 5-23
Author(s):  
Janina Witkowska

This article discusses the conditions surrounding the flow of foreign direct investment (FDI) between the developing countries of Asia (East Asia, South-East Asia, Southern Asia, and Western Asia) and the countries with membership in the European Union (EU), including the so-called ‘new’ Member States (EU12). At the intra-regional and inter-regional levels, the flow is especially affected by the world economic crisis, which has effected changes in the positions of the analyzed countries on a global scale. The integration processes taking place in the EU also significantly affect the intensity of FDI flow within the group, while the processes taking place in the developing countries of Asia are not yet sufficiently enough advanced to significantly affect the flow of FDI. Inter-regional FDI flows take place between the subject regions and sub-regions. The observed phenomenon of emerging Asian net exporters of capital in the form of FDI to the European Union may be strengthened by the process of Asian integration. For the new EU Member States the developing Asian countries may constitute an alternative source of capital in the crisis conditions.


2014 ◽  
Vol 234 (6) ◽  
Author(s):  
Iulia Siedschlag ◽  
Ville Kaitila ◽  
John McQuinn ◽  
Xiaoheng Zhang

SummaryThe global financial and economic crisis has severely affected foreign direct investment, particularly the cross-border mergers and acquisitions in advanced economies. This paper examines the effects of foreign mergers and acquisitions on labour productivity and employment growth over the period 2001-2009 in six small open economies in the European Union: Austria, Belgium, Denmark, Finland, the Netherlands and Sweden. We show that the severity of the crisis has been uneven across these six economies. Taken together, our estimates suggest that foreign direct investment had stronger effects on firm performance in services than in manufacturing.


2021 ◽  
Vol 14 (11) ◽  
pp. 559
Author(s):  
Marian Catalin Voica ◽  
Mirela Panait ◽  
Eglantina Hysa ◽  
Arjona Cela ◽  
Otilia Manta

This aim of this work is to study the relationship between foreign direct investment (FDI) and trade. FDI is a driving force for economic growth for host countries. The positive effects of FDI are seen in many aspects of the economy. However, the implications of FDI on foreign trade are questionable. Therefore, this study uses a Granger causality technique to test whether the relationship between FDI and foreign trade is complementary or substitutive. The findings of this study indicate that this relationship appears to be complementary, and FDI investment does cause an increase in trade flow in the countries that are taken into consideration. This research aims to make a comparison between the relations of FDI flows of three groups of countries from the European Union (EU)—Romania and Bulgaria, the Visegrád Group and the Euro area—for the period of 2005 to 2019. However, the results indicate that this link between the variables is not yet found for the three group of countries, and further research is required in this aspect. This leads to the conclusion that the FDI impact on foreign trade of the host country depends on the type of investment and absorptive capacity of the receiver, the economic development of host and home countries, and not every type of FDI leads to more trade.


2021 ◽  
Vol 24 (1) ◽  
pp. 27-43
Author(s):  
Janina Witkowska

Global flows of foreign direct investment (FDI) have slowed down in recent years, which particularly affected developed countries, including those in the European Union (EU). A general decrease in capital circulation in the form of FDI between the EU and the rest of the world has been observed. The aim of this paper is to assess the changes in the EU’s position in global FDI flows and stocks and to discuss attempts made by EU institutions and the EU member states to improve this position. The EU can use the common investment policy to strengthen its investment position. The EU acquired the competence to conduct this policy based on the Lisbon Treaty, while its actual shape was determined in practice. Improving the EU’s position in global FDI flows requires agreements regarding foreign investment, concluded at the EU level with other countries and integration groupings. Ensuring national treatment of investors before and after investing is important, as are solutions used for inwestor protection, inwestor-state-dispute-settlements (ISDS), and the use of investment project screening to protect strategic sectors of the EU economy. The EU investment policy can mitigate the effects of slowing down FDI flows, create a more favorable climate for outgoing FDI, and protect vital interests for FDI coming into the EU from third countries.


2019 ◽  
Vol 5 (3) ◽  
pp. 184 ◽  
Author(s):  
Svitlana Rostetska ◽  
Svetlana Naumkina

The scientific interest of the development of the theory and practice of cooperation of Central European countries of the Visegrád Group in the context of modern European integration processes is important for developing and implementing the strategy of foreign and domestic policy in European countries and Ukraine at the modern stage. At the beginning of the XXI century, under the changes in the geopolitical situation on the European continent, the countries of Central Europe (full members of the European Union) build a new operating system of international relations and accordingly continue to delegate some of their powers to suprastate institutions of the EU. The purpose of this scientific study is to determine paradigmatic aspects of European integration processes, modern threats arising in the EU, prospects for the interaction of EU countries, and to form a new format of cooperation of Ukraine and countries of the Visegrád Group. The aim of the creation of the alliance of the Visegrád Group (1991) was the desire to contribute to the construction of European security architecture and economic cooperation through the effective cooperation within European institutions. The whole activity of the Visegrád Group is aimed at strengthening stability in the Central European region. Risks in the economic sphere and strengthening of Euroscepticism are considered traditional for the EU functioning. In view of signing the Rome Declaration in 2017, the EU threats and challenges for the short-term (2018–2020) include: hybrid consequences of the aggression of the Russian Federation in Ukraine, European migrant crisis, a series of terrorist acts in European cities, unpredictable policy of the newly elected US president D. Trump in relation to the European security system, strengthening the position of far-left and far-right political forces in European states, Brexit and its consequences, in particular, risk of domino effect in other member countries of the Union. Therefore, we consider it appropriate to carry out system analysis of key relevant challenges and threats to the EU for 2018–2020 and to consider interconditionality and interdependence of problems that may affect the EU future. Given the defined trends, development and economic stability of each state are strategically important, however, special attention in this context should be paid to the analysis of the development of large countries of the European Union, such as Poland, Czech Republic, Slovakia, and Hungary. V4 countries are characterized by sustainable economic growth. If to analyse the Visegrád Four as a single national state, then the Visegrád Group is the fifth largest economy in Europe and the 12th in the world. The authors consider it too simplistic to define the essence of the Visegrád alliance only as a consolidation of the efforts of Central European countries for the sake of “returning to Europe” through Euro-Atlantic integration. In the modern dimension of events, the interaction format V4 + Ukraine is much more complex and more promising than it appears. Since joining NATO and the European Union in 1999 and 2004 by the Visegrád Group (i.e. Central European countries) geopolitically changes the status of the Central European Region, transforms bilateral and multilateral relations of Central European countries – full members of the EU with Ukraine. Moreover, this changes the system of relations within the Visegrád Four, as well as with other member states of the European Union.


2015 ◽  
Vol 10 (2) ◽  
pp. 7-28 ◽  
Author(s):  
Bardhyl Dauti

Abstract This paper accounts for the main determinants of Foreign Direct Investment stocks to 5-South East European Countries and the 10-New Member States of the European Union countries by using an augmented Gravity Model, for the purpose of calculating the potential levels of FDI stock in Macedonia. The study takes into account country specific institutional factors that determine foreign investors’ decisions from 20 core OECD countries to invest in SEE-5 and EU-NMS-10 countries. From the results of the study we find that gravity factors (market size and distance), institutional related factors (control of corruption, corruption perception index, regulatory quality, transition progress and WTO membership) and other traditional determinants of FDI (schooling, bilateral exports) appear to significantly determine inward FDI stock to the SEE region and new EU member states. The GMM estimates suggest that bilateral FDI stock is subject to persistence effects. The study additionally confirms the relatively strong gravitational character of Macedonia’s inward FDI stock.


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