Labour market effects and changes among enterprises in free enterprise zones in Hungary

Abstract

The aim of regional development and planning, as defined in the 1996 Spatial Development Law, is to promote social and economic growth and reduce significant economic and infrastructure disparities. Its role is to support community initiatives to this end, with a particular emphasis on promoting the catching up of lagging regions, reducing unemployment and supporting the regeneration of industrial and agricultural businesses. This legislation enabled the creation of the Free Enterprise Zones in Hungary in 2013. The list, which has been extended twice since then, currently includes 1202 municipalities. Municipalities belonging to the zones create a favourable environment for investment, and businesses that invest and create jobs in the area can benefit from corporate tax relief and contributions payable by employers and are eligible for EU funding. According to the hypothesis of our research, the number of jobseekers in the municipalities of FEZs (compared to other municipalities) has decreased significantly, while the number of enterprises has increased. Furthermore, counties with a higher proportion of FEZ municipalities were presumed to have received more EU funds. To demonstrate this, we examined the labour market processes within FEZs due to the effects of their inclusion in the zones. Drawing on official labour market and business-related regional statistics, the analysis takes a regional perspective and seeks to focus on temporality. The database contains data at the level of municipalities (registered jobseekers, public employees, active enterprises, number of employees, subsidies) for the period under study (2012)(2013)(2014)(2015)(2016)(2017)(2018)(2019)(2020). In addition to labour market processes, a further focus of the analysis was the inclusion of the SME sector to uncover mutually positive effects. According to the findings of our research, the positive impact on labour market processes cannot be clearly justified, whereas for the enterprises, inclusion in the zone induced positive effects. A positive effect was also found in terms of average staff numbers. The results show that the use of development aid is more effective for enterprises operating within the zones than in other parts of Hungary.

Territorial disparities and economic processes in Hungary: Editorial

“…The results show that the use of development aid is more effective for enterprises within the zones than in other parts of Hungary. A stronger than medium positive correlation can be detected in terms of the amount of aid received by the enterprises, i.e., the objective of calls for proposals to attract more resources to the areas concerned has been achieved (Dániel, 2022).…”