Capital flows impact on labor market: how do FDIs and remittances effect youth employment in Bosnia and Herzegovina?

Abstract

This paper addresses the impact of Foreign Direct Investments and remittances as capital flows on the employment. The focus of the analysis is how impacts of those two can be measurable and comparable if we have total employment on one side and youth employment on the other side. Sign restricted VAR is used as a framework to see how employment reacts to capital flow shocks. Total and youth employment reacts positively in both cases. Overall importance of remittance as a factor that maintains fragile macroeconomic balance should not be neglected. Similarity of impact on employment in impulse-response framework for remittances and FDIs indicates the similarity of the channels of transmission. This research represents confirmation of doubt that FDIs are not so significant in terms of total technological and human capital spillover in current setting in Bosnia and Herzegovina.