The aim of this paper is to empirically examine the impact of foreign direct investment (FDI) inflows (% of GDP) on unemployment in the Western Balkan economies. Specifically, this research aims to enhance the understanding of the quality of FDI in the Western Balkans and its connection to labour market outcomes. Using annual panel data and employing fixed effects and system GMM estimators, the study addresses potential endogeneity between FDI and unemployment while controlling for macroeconomic conditions. The goal is to assess the extent to which FDI contributes to job creation in small, transition economies, while considering differences between labour-intensive and capital-intensive investment structures. By exploring these dynamics, the study offers insights for policymakers seeking to align investment attraction strategies with inclusive employment objectives and economic stability in the region.
Memeti et al. (Wed,) studied this question.