Labor costs and the inflow of foreign direct investment to the European Union
Labor costs and the inflow of foreign direct investment to the European Union

Summary/Abstract: The relationship between labor costs and foreign direct investment (FDI) has been relatively well explored in the source literature, but seemingly less so in the long-term perspective. The aim of this paper is to analyze changes in labor costs in EU countries between 1995 and 2015, and then to verify a hypothesis of their positive impact on the inflow of foreign direct investment. To this end, statistical data published by international organizations for this period was used, and research was conducted based on descriptive analysis methods. A general conclusion drawn from the conducted research is that the level of labor costs is in fact one of the several factors influencing FDI location decisions, and its importance should be assessed having in mind e.g. labor productivity and target industries in a host country. Labor costs can be more important for FDI in labor-intensive industries with lower value added, but estimation of this phenomenon goes far beyond the framework of this research paper.

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