Low Labor Cost as a Determinant of Foreign Direct Investments in Albania, Kosovo and North Macedonia
Abstract
Expanding activities abroad to exploit existing advantages, to seek economies of scale or to finalize a production phase in an economy other than that of the home country is common for multinational enterprises (MNE), whilst seeking new locations where higher intensity of labor is required is a characteristic especially for the vertical foreign direct investment (FDI) and export-oriented firms. Low labor cost is considered one of the primary comparative advantages for the countries of South-Eastern Europe in terms of attracting FDI. Our paper contributes to the literature by examining how low labor cost impacts the level of FDI inflows in three countries of Western Balkans: Kosovo, Albania and North Macedonia. Our analysis reveals that low labor cost is not positively related and significant in these countries with regard to the attraction of FDI inflows.
Keywords:
FDI, Western Balkan, Labor Cost
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