A panel data analysis of FDI and informal labour markets

The objective of this paper is to examine whether informal labour markets affect the stock of Foreign Direct Investment (FDI) and also whether this effect is similar in developed and developing countries. Panel econometric models are estimated for a sample of 65 countries over a 10-year period (1999-2007). While the results show that informal labour markets are significant and do positively affect FDI, they do so more for developing countries than developed countries and are robust to several checks.