Unemployment effects of greenfield and brownfield investments in post-transition European Union members

Abstract

International direct and portfolio investments have gone up considerably as of mid-1980s. The foreign direct investments with characteristic of long term horizon may affect the economic variables through know-how and technology transfer, physical capital expansion, and new job creation. However, foreign direct investments may have potential to negatively affect the domestic competitors with insuffi cient competitiveness in the industry. So, the economic effects of FDI infl ows have been one of the much-debated and studied issues in the international economics. This study investigates the unemployment effects of greenfi eld and brownfi eld investments in 11 posttransition EU members over 2003–2017 period through panel cointegration and causality tests. The article fi lls the gap in the literature, because the relevant empirical literature has generally researched the impact of total FDI fl ows on the unemployment/employment. The empirical fi ndings revealed that brownfi eld investments raised the unemployment in overall panel in the long run, but greenfi eld investments had no signifi cant impacts on the unemployment in overall panel in the long run. However, greenfi eld investments decreased the unemployment in Croatia, Hungary, and Slovenia, and raised the unemployment in Poland and Slovakia, while brownfi eld investments raised the unemployment only in Czechia. Consequently, it is not very reasonable to compare our fi ndings with the results of other studies using total FDI infl ows as the independent variable. But, it is generally consistent with theoretical and empirical expectations