FDI Inflow Effects on Western Balkan Area's Labour Markets

Labour market dependency on Foreign Direct Investments (FDI) inflow is very high in transition economies. This paper estimates the effects of FDI inflow on the employment rate and average net wages in Western Balkan economies in the period 2003–2017. The sample of economies (Albania, Bosnia and Herzegovina, Croatia, North Macedonia, Montenegro, and Serbia) was selected mainly because of the high legacy with FDI and unsaturated labour market. Presumably, FDI inflow has a positive impact on the employment rate and on average net wages in the Western Balkan countries. Employing linear mixed-effects models (LMM), the results indicate that FDI inflow changes have very low but positive and significant effects on both the changes in employment rate and on average net wages.