Effects of FDI Inflows on Regional Labour Market Differences in Hungary

Post-transitional labour markets of the Central and East European countries have been characterised by marked regional differences. This paper will concentrate on the spatial pattern of job creation, determined by the allocation decisions of foreign and domestic investors. Regions with the highest employment rates may boast high doses of FDI inflows, while low employment regions have been suffering from the persistent lack of outside investments. The paper describes the regional distribution of foreign and domestic employment. The second section analyses the spatial distribution of FDI and domestic firms’ employment, and points out the most important explanatory factors of their regional distribution. The third section discusses the time path of regional labour market differences in Hungary and measures the impact of foreign firms’ net job creation on employment, in high and low employment regions. The last section concludes with some policy relevant messages.