Influence of structural distribution of FDI inflows on labour productivity of Visegrad countries

Abstract

Although FDI flows into most post-socialist countries are based on their market transformation development, the largest volume is directed to the Visegrad countries that are generally perceived as above-average successful in attracting foreign investors. The paper analyses how does the inflow of FDI into Czech Republic, Hungary, Poland and Slovakia contribute to the growth potential of labor productivity during period of 2010-2016. The shift-share analysis of OECD data within 11 key sectors decomposes the determinants of labour productivity and determines contribution to the potential of labour productivity growth. The results are interpreted on the basis of the sectoral, competitive and residual effect. Findings proved no significant differences in productivity between economics however the localization of foreign capital to technology-intensive industries does not put pressure on progressive productivity growth. Decreased inflows of foreign capital, averaged by 8% from all sectors within the region, are driven in each country by a different industry. Results also demonstrated more attractive structure of the sectors of the Czech and Hungarian economics for stimulation the inflow of foreign capital into a country. The presented approach contributes to the issue of complexity of the FDI localisation and the countries´ ability to assume the presence of foreign capital. The stated recommendations are considering the economic regulations related to pandemic situation in 2020.