Essays on Labor Economics: Labor Market Laboratory in Central Europe

Abstract

The first part of this dissertation evaluates the impact of a large and territorially concentrated foreign direct investment (FDI) inflow on local labor market outcomes in the Czech Republic. A difference-in-differences technique is employed for estimating the impact of a joint investment of Toyota and Peugeot on local labor market indicators. The results indicate a positive and statistically as well as economically significant effect of a large investment project on the local unemployment outflow rate, which is driven mainly by increases in the aggregate unemployment exit hazard rates for unemployment durations smaller than nine months. However, the impact on long-term unemployed was negligible. Moreover, a simple cost--benefit analysis suggests that investment incentives paid from a state budget would pay off only in a horizon of twelve years. In the second chapter, I analyze the causal effect of investment incentives on regional allocation of FDI in the Czech Republic during 2001-2007. An institutional setup of investment incentives provided foreign investors with financial incentives depending on the particular district's unemployment rate. The identification strategy is based on a regression- discontinuity approach, as the scheme's design introduces three unemployment thresholds...

The first part of this dissertation evaluates the impact of a large and territorially concentrated foreign direct investment (FDI) inflow on local labor market outcomes in the Czech Republic. A difference-in-differences technique is employed for estimating the impact of a joint investment of Toyota and Peugeot on local labor market indicators. The results indicate a positive and statistically as well as economically significant effect of a large investment project on the local unemployment outflow rate, which is driven mainly by increases in the aggregate unemployment exit hazard rates for unemployment durations smaller than nine months. However, the impact on long-term unemployed was negligible. Moreover, a simple cost--benefit analysis suggests that investment incentives paid from a state budget would pay off only in a horizon of twelve years. In the second chapter, I analyze the causal effect of investment incentives on regional allocation of FDI in the Czech Republic during 2001-2007. An institutional setup of investment incentives provided foreign investors with financial incentives depending on the particular district's unemployment rate. The identification strategy is based on a regression- discontinuity approach, as the scheme's design introduces three unemployment thresholds...