Labor Market Flexibility and FDI Flows: Evidence from Oil-Rich GCC and Middle Income Countries

Mina, Wasseem and Jaeck, Louis (2015): Labor Market Flexibility and FDI Flows: Evidence from Oil-Rich GCC and Middle Income Countries.

Abstract

In this paper we empirically examine the impact of labor market flexibility on FDI flows to oil-rich GCC and compare it to middle income countries in 2006-2011. We account for potential endogeneity and nonstationarity and adopt system GMM and IV estimation methodologies. Our findings show that in middle income countries overall flexibility increases FDI flows under both system GMM and IV methodologies. In GCC countries overall LMF decreases FDI flows under system GMM methodology. Results also show a positive “GCC region” influence outweighing the negative flexibility influence. Growth potential and infrastructure development matter for both GCC and middle income countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: Labor markets; FDI; GCC; Middle income countries; UAE
• Subjects: F - International Economics > F2 - International Factor Movements and International Business; F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment ; Long-Term Capital Movements; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J32 - Nonwage Labor Costs and Benefits ; Retirement Plans ; Private Pensions; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J38 - Public Policy; J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining; J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J53 - Labor-Management Relations ; Industrial Jurisprudence; J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J58 - Public Policy; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J65 - Unemployment Insurance ; Severance Pay ; Plant Closings; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J68 - Public Policy

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