Foreign Direct Investment and Job Creation in EU Regions

Abstract: This study examines the impact of foreign direct investment (FDI) on job creation across 109 regions in the old EU member states from 2012 to 2023. Using dynamic and spatial econometric models combined with a unique dataset of FDI projects, we find that increased FDI inflows significantly enhance regional job creation, but the relationship is nonlinear. Sectoral specialization plays a crucial role, as more concentrated FDI inflows lead to higher employment growth. Furthermore, FDI-driven job creation exhibits significant spatial spillover effects. However, regions attracting high-value FDI jobs, such as those in R&D and management, tend to experience slower overall employment growth.