Europe > Montenegro

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Dmitriy Kovtun
,
Alexis Meyer-Cirkel
,
Ms. Zuzana Murgasova
,
Mr. Dustin Smith
, and
Suchanan Tambunlertchai
Labor markets in the Western Balkan countries (Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro, and Serbia) are characterized by some of the highest unemployment and low employment rates in Europe. We analyze the poor labor market outcomes in these countries by comparison with the New Member States of the European Union and advanced European economies. Our findings suggest that long-lasting labor market weaknesses in the Western Balkans have structural roots: the institutional setup of the labor markets, labor cost factors, and especially the unfinished transition process. Finally, we offer policy recommendations for boosting job creation.
Ms. Elina Ribakova
,
Mr. Balázs Horváth
,
Mr. Dimitri G Demekas
, and
Mr. Yi Wu
Gravity factors explain a large part of Foreign Direct Investment (FDI) inflows in Southeastern Europe-a region not comprehensively covered before in econometric studies-but hostcountry policies also matter. Key are policies that affect relative unit labor costs, the corporate tax burden, infrastructure, and the trade regime. This paper develops the concept of potential FDI for each country, and uses its deviation from actual levels to estimate what policies can realistically be expected to achieve in terms of additional FDI. It also finds evidence that above a certain threshold, the importance of some policies for attracting FDI is distinctly different.