Foreign Direct Investment and Labour Productivity: Relationship and Interconnection

Abstract

The article aims to define the interconnection and interdependence of foreign direct investment (FDI) and labour productivity. The contributing factors of economic modernization, R&D spending, and production cost reduction to labour productivity growth are defined. The comparison analysis of FDI inflow, outflow, and labour productivity in the European Union countries is provided. The paper contributes to the empirical explanation of the relationship between labour productivity and FDI outflow and wage growth in certain sectors of the economy. The existence of higher wages in industries with a higher presence of joint venture foreign investments and industries with greater foreign participation was analysed. Greenfield investments are considered a stimulus for economic growth by the supply increase of both national and companies controllable by foreign proprietors. The sources of enhancing investment in R&D released by labour from economic sectors are proposed.