Does the Impact of Employment Protection Legislation on Foreign Direct Investment Differ by the Skill Intensity of Industries? An Empirical Note

Abstract

In line with previous literature, we find that strict employment protection deters foreign direct investment. This finding is consistent with the view that rigid labour markets result in high adjustment and exit costs which discourage firm investment. Moreover, our results are consistent with the view that the deterrent effect of rigid labour markets depends on the skill intensity of an industry.