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Figure 4: Cumulated FDI flows (in thousands of CZK per capita)
over the period 1999-2015 versus differences in UR between
2016 and 2000. Source: own processing

Discussion of results

Regarding the FDI flows the regions can be separated to three
groups: rather low FDI recipient (KV, PA, US, OL), high FDI
recipient (MS and SC) and middle recipient (HK, LI, JM, ZL,
VY, JC, PL), (see Fig. 4). However, the response values of the
UR change are rather scattered, which means that the
development of UR in regions in the same group was quite
different. Hence, the results do not support the assumption of the
positive impact of regional FDI flows on the regional UR
development.

To obtain more details about individual regions (for instance on
MS region experiencing a positive contribution of FDI to UR
change due a massive investment to the Hyunday factory, among
others) the micro-economic analysis of the particular FDI
impacts on UR should be performed.

These results can be attributed to the fact that the basic
characteristics of the regions (economic, population,
geographical, historical, cultural, etc.) are given so strongly that
the FDI flows could not systematically affect the UR
development over considered time. Another reason may follow
from the FDI state support policy, which in practise manifests
itself by the decrease of overall costs of the supported firms
giving them competitive advantage. Simultaneously, the inflow
of FDI is often connected with the technology modernization
and more efficient production processes, which can lead to the
substitution of labour factor for capital resulting in the UR
increase.

6 Conclusion

The issue of the convergence of the Czech regions in 2000-2017
and its relation with the foreign direct investments was discussed
and analysed by means of empirical data. Any significant trend
in convergence was not proven. Nevertheless, in the examined
period, the internal and external temporary factors seem to
influence the regional GDP potential in terms of temporary
convergence; this applies to the GDP variability reduction as
well as unemployment reduction in the poorer regions. As an
external temporary factor, the financial crisis 2008 can be
regarded, internal temporary factors cover diverse forms of
regional growth supports, including the FDI inflows.

Moreover, a question was arisen whether any positive influence
of regional FDI flows to the UR development could be revealed.
The performed analysis excluded this hypothesis. This may have
resulted from the existence of basic and strong characteristics of
the regions (economic, population, geographical, historical,
cultural, etc.), which did not allow the FDI flows to affect
systematically the UR development over the considered time.
Another reason could arise from the FDI state support policy.
This allows us to conclude that the insensitivity of

unemployment rate to the FDI inflows indicates ineffectiveness
of active employment policy, in particular regarding the FDI as
one of the instruments of the unemployment reduction.

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Primary Paper Section: A

Secondary Paper Section: AH, BB

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