The impact of foreign direct investments on economic growth and employment in Albania

• Date: 01 June 2018

Vol. 2 No. 2

June, 2018

European Journal of Economics, Law and Social Sciences

IIPCCL Publishing, Graz-Austria

ISSN 2519-1284

Acces online at www.iipccl.org

148

The impact of foreign direct investments on economic growth and employ-

ment in Albania

PhD (C.) Lorena Çakërri

University “Ismail Qemali “Vlorë , Albania

Assoc. Prof. Filloreta Madani

University “Ismail Qemali “Vlorë, Albania

Abstract

Albania has experienced a growing performance of FDI inf‌l ows a er the 1990s. This has been

due to the fact that Albania has managed to create a liberal regime for foreign investment.

This positive a itude towards these f‌i nancial f‌l ows derives from the prospect of benef‌i ting

from them. These positive e ects driven by foreign investors are diverse in terms of economic

growth, the spread of technologies, the improvement of def‌i cits, employment, technology,

and so on. The purpose of our paper is to investigate some of the e ects of foreign direct

investment. We will analyze the impact of FDI on economic growth, technology transfer, gross

capital formation, budget def‌i cit f‌i nancing through a descriptive analysis of data published by

various institutions such as World Bank, UNCTAD and Ministry of Finance etc. The impact

of FDI inf‌l ows into employment levels will be investigated through an econometric analysis

based on secondary data.

Keywords: foreign direct investment, technology transfer, employment, economic growth,

gross f‌i xed capital formation.

Introduction

Albania, like other developing countries, is characterized by friendly policies in

the absorption of foreign direct investment f‌l ows. This is because of the absence of

domestic capital. Foreign investment is one of the most important sources of economic

development in the country. The expected positive e ects in the host country spread

in many dimensions. Foreign investment brings advanced technology, helps in gross

f‌i xed capital formation, helping the country's economic growth. But one of the most

desirable e ects is the level of employment. This is because employment is an indicator

of economic condition and it is also a social indicator. Albania is characterized by

low levels of employment. A er the collapse of communism, employment became a

plague for the Albanian economy. Although Albania has absorbed a satisfactory share

of foreign investment in the region1, employment performance has not ref‌l ected this

trend.

1 According to: The Vienna Institute for International Economic Studies, Albania was ranked sec-

ond in the region, a er Serbia for the volume of inf‌l ows of foreign direct investment in 2016. h ps://

wiiw.ac.at/press-release-wiiw-fdi-report-2017-english-pnd-36.pdf.