Government investment incentives and job creation measures

Abstract

Our study assesses the government's investment promotion objectives, the set of tools and institutions serving them and the results achieved between the years of 2010 and 2017 in Hungary. The main objectives of the investment promotion policy were to create jobs, stimulate investment in knowledge-intensive sectors, improve R&D and improve the position of small and mediumsized enterprises as suppliers. The strategic objectives of investment promotion were set in government strategies and plans, however, quantified targets, indicator and monitoring system were typically not implemented in the documents and were not followed up. During the analyzed period, the inflow of capital increased, job creation targets were met, and most of the contracts were concluded with companies actives in industries targeted for support. However, there was no significant increase in R&D investment. Labor market transformation in 2017 did not justified further public support for individual job creation. It would have rather been appropriate to address labor shortages and rising labor costs in each area by supporting knowledge-intensive,
high value-added industrial and service sectors. Job allocation and labor mobility across industries and regions also need to be supported in order to adapt in a flexible way to labor market developments.