The Asymmetric Effect of Foreign Direct Investment on the Net Average Wages of Southeastern European Countries

There is a widespread belief in transition and growing economies that the relationship between FDI and wages is symmetrical. On the other hand, the problem of the nonlinear impact of FDI on wages has remained insufficiently explored. Therefore, this paper aims to determine whether there is an asymmetric effect of FDI stock on the net average wages within the eight SEE (Southeastern European countries) economies. We used the nonlinear autoregressive distributed lag (NARDL) and as well on the annual data for the period from 2000 to 2018. We found that there is an asymmetric impact of FDI stock on the net average wages of Bulgaria and Slovenia. In addition, we found that the symmetric effect is stronger compared to the asymmetric effect that the FDI stock has on the net average wages of Bulgaria, N. Macedonia, Montenegro, Serbia and Slovenia. Finally, we found that productivity, employment and education significantly affect solely Slovenia's net average wages. The main implication of our study is that the symmetric approach is more dominant than the asymmetric approach in estimating the effect of FDI stock on the net average wages of SEE economies. The results of the research may suggest to policy makers that the growth of net average wages of SEE countries depends on policies and measures to attract FDI. It is necessary to use measures that will increase the inward FDI stock, develop market structures and improve the competitiveness of the economy, increase productivity, increase employment, improve education and trade openness, etc.