How can a flexible labour market influence the amount of foreign direct investment attracted by a host nation? The case of the UK

Abstract

It has often been suggested that Britain’s favourable position of attracting over 30 per cent of Japanese foreign direct investment (FDI) has been dependent on the flexibility of the labour market. However it is important to understand exactly what is meant by a flexible labour market. This article sets out to examine the full meaning of a flexible labour market drawing on the evidence of particular success in attracting FDI in the UK. It then considers the importance of the flexible labour market in relation to other possible factors influencing the decision whether to invest. Also advises of the benefit and costs for other countries wishing to formulate policies that attract greater amounts of FD