Foreign Direct Investment Employment Effect Analysis: A Systematic Study

Document Type : Scientific paper

Authors

1 Ph.D. in Entrepreneurship, Management & Entrepreneurship Department, Faculty of Social Sciences, Razi University, Kermanshah, Iran

2 Associate Professor of Economics, Economics Department, Faculty of Social Sciences, Razi University, Kermanshah, Iran.

Abstract

Foreign direct investment has been the subject of many studies due to its importance in providing financial resources for companies, governments, and technology transfer. Its effects and relationship with various economic factors, including employment, have been the focus of researches. However, there is still no coherent review study that takes into account other aspects of the issue and draw a general conclusion from the studies along with investigating the effect of foreign direct investment. This study is designed to fill this information gap. Among the searched articles, 329 published English papers about the effect of foreign direct investment on employment were studied and the results were presented according to dimensions such as the effect of short-term and long-term employment generation, the effect on skilled and simple labor force, etc. Finally, this general result was extracted that the maximum positive effect of Foreign Direct Investment (FDI) on employment is achieved when the FDI enters the host country in the form of Greenfield, and the training of human resources should be done by the FDI, especially the simple workforce, to match the level of technology imported by it. Policy making and legislation should support employment to maximize the country's absorption capacity and oblige the FDI to supply labor, raw materials, and required services from the host country.

Keywords

Main Subjects

References

Abdel-Aal-Mahmoud, A. (2010). FDI local financial markets: Employment and poverty alleviation. Development economics e-Journal, 2(134), 1-36.
Abor, J., & Harvey, S. K. (2008). Foreign direct investment and employment: Host country experience. Macroeconomics and finance in emerging market economics, 1(2), 213-225.
Agnew, K., & Lyons, R. C. (2018). The impact of employment on housing prices: Detailed evidence from in Ireland. Regional science and urban economics, 70(C), 174-189.
Albulescu, C. T., & Tamasila, M. (2013). The impact of FDI on entrepreneurship in the European countries. Procedia social and behavioral sciences, 124(1), 219-228.
Alfalih, A. A., & Hadj, T. B. (2020). Asymmetric effects of foreign direct investment on employment in an oil producing country: Do human capital institutions and oil rents matter? Resource policy, 70(C), 1-11.
Amoroso, S., & Castello, P. M. P. (2018). Inward Greenfield FDI and patterns of job polarization. Sustainability, 10(4), 1-20.
Andrews, M., Bellmann, L., Schank, T., & Upward, R. (2007). The takeover and selection effects of foreign ownership in Germany: An analysis using linked worker firm data. Friedrich Alexander Universität.
Anne, Z. (2010). The Korean labor market: Some historical macroeconomic perspectives. Working Paper No. 59, International Labor Organization.
Aromataris, E., & Pearson, A. (2014). The systematic review: An overview. American journal of nursing, 114(3), 53-58.
Asiedu, E. (2004). The determinants of employment of affiliates of US multinational enterprises in Africa. Development policy review, 22(4), 371-379.
Asiedu, E., & Brempong, K. G. (2008). The effect of the liberalization of investment policies on employment and investment of multinational corporations in Africa. African development review, 20(1), 49-66.
Ato-Mensah, S., & Long, W. (2021). Impact of FDI on economic growth employment and poverty reduction in Ghana. Journal of business and management, 9(3), 1291-1296.
Axarloglou, K., & Pournarakis, M. (2007). Do all foreign direct investment inflows benefit the local economy? The world economy, 30(3), 424-445.
Bailey, D., & Driffield, N. (2007). Industrial policy FDI and employment: Still missing a strategy. Journal of Industry competition and trade, 7(3), 189-211.
Bajo-Rubio, O., & Diaz-Mora, C. (2015). On the employment effects of outward FDI: The case of Spain. Applied economics, 47(21), 2127-2141.
Baldwin, R. E. (1995). The effects of trade and foreign direct investment on employment and relative wages. Working Paper No. 4, OECD.
Barry, F. (2006). FDI and Irish economic development over four stages of European integration. University of Dublin.
Becker, B., Driffield, N., Lancheros, S., & Love, J. H. (2020). FDI in hot labor markets: The implications of the war for talent. Journal of international business policy, 3(1), 107-133.
Beugelsdijk, S., Smeets, R., & Zwinkels, R. (2008). The impact of horizontal and vertical FDI on host`s country economic growth. International business review, 17(4), 452-472.
Bhattacharyya, R. (2012). The opportunities and challenges of FDI in retail in India. Journal of humanities and social science, 5(5), 99-109.
Blalock, G., & Simon, D. H. (2009). Do all firms benefit equally from downstream FDI? The moderating effect of local supplier`s capabilities on productivity gains. Journal of international business studies, 40(7), 1095-1112.
Blanas, S., Seric, A., & Viegelahn, C. (2017). Jobs FDI and institutions in sub Saharan Africa: Evidence from firm level data. Working Paper No. 2017/004, Lancaster University.
Brincikova, Z., & Darmo, I. (2013). The impact of FDI inflow on employment in V4 countries. International scientific forum, 1(1), 245-252.
Bronzini, R. (2015). The effects of extensive and intensive margins of FDI on domestic employment: Microeconomic evidence from Italy. Journal of economic analysis and policy overview, 15(4), 2079-2109.
Chen, B., Li, Y., & Yin, Y. (2016). FDI industry heterogeneity and employment elasticity in China. Review of development economics, 20(1), 189-200.
Chipeta, C., & Meyer, D. F. (2018). Trade openness: FDI and exchange rate effects on job creation in South Africa`s tradable sectors. Journal of economics and behavioral studies, 10(4), 197-212.
Chuang, Y. C., & Hsu, P. F. (2004). FDI, trade and spillover efficiency: Evidence from China`s manufacturing sector. Applied economics, 3(10), 1103-1115.
Ciobanu, A. M. (2020). The impact of FDI on economic growth in case of Romania. International journal of economics and finance, 12(12), 81-88.
Clark, D. P., & Highfill, J. (2011). FDI technology spillovers growth and income inequality: A selective survey. Global economy journal, 11(2), 1-42.
Cozza, C., Rabellotti, R., & Sanfilippo, M. (2015). The impact of outward FDI on the performance of Chinese firms. China economic review, 36(4), 42-57.
Crescenzi, R., Ganau, R., & Storper, M. (2021). Does foreign investment hurt job creation at home? The geography of outward FDI and employment in the USA. Journal of economic geography, 22(1), 53-79.
Cuadros, A., Mart-n-Montaner, J., & Paniagua, J. (2018). Migration and FDI: The role of job skills. International review of economics and finance, 59(C), 318-332.
Cuyvers, L., Dumont, M., Rayp, G., & Stevens, K. (2005). Home employment effects of EU firms activities in central and eastern European countries. Open economies review, 16(2), 153-174.
Damijan, J. P., Rojec, M., Majcen, B., & Knell, M. (2013). Impact of firm heterogeneity on direct and spillover effects of FDI: Micro evidence from ten transition countries. Journal of comparative economics, 41(3), 895-922.
Debaere, P., Lee, H., & Lee, J. (2010). It matters where you go, outward foreign direct investment and multinational employment growth at home. Journal of development economics, 91(2), 301-309.
Denisia, V. (2010). Foreign direct investment theories: An overview of the main FDI theories. European journal of interdisciplinary studies, 3(2), 53-59.
Denyer, D., & Tranfield, D. (2009). Producing a systematic review. In The sage handbook of organizational research methods (pp. 671-689). Sage.
Dewit, G., Gorg, H., & Montagna, C. (2009). Should I stay or should I go? Foreign direct investment employment protection and domestic anchorage. World economy, 145(1), 93-110.
Dunning, J. H. (1988). The eclectic paradigm of international production: A restatement and some possible extensions. Journal of international business studies, 19(1), 1-31.
Eckel, C. (2003). Fragmentation efficiency seeking FDI and employment. Review of international economics, 11(2), 317-331.
Elgin, C. (2020). Foreign direct investment, informality and technology transfer. Review of development economics, 25(2), 994-1015.
Ernst, C. (2005). The FDI employment link in a globalizing world: The case of Argentina, Brazil and Mexico. Working Paper No. 2005/17, International Labor Organization.
Fadaee, M., & Kazemi, Sh. (2013). Survey of foreign direct investment growth on employment in Iran (ARDL Approach). Economic growth and development research, 3(9), 71-84. (In Persian).
Federico, S., & Minerva, G. A. (2008). Outward FDI and local employment growth in Italy. Review of world economics, 144(2), 295-324.
Feng, Y., & Wang, Y. (2021). A review of the impact of FDI on skill acquisition. Canadian social science, 17(1), 80-86.
Franco, C. (2013). Exports and FDI motivations: Empirical evidence from US foreign subsidiaries. International business review, 22(1), 47-62.
Fu, X., & Balasubramanyam, V. N. (2005). Exports foreign direct investment and employment: The case of China. World economy, 28(4), 607-625.
Furtan, W. H. & Holzman, J. J. (2004). The effect of FDI on Agriculture and food trade: an empirical analysis. Working Paper No. 68, University of Saskatchewan.
Goergen, M., O`Sullivan, N., & Wood, G. (2014). The employment consequences of private equity acquisitions: The case of institutional buyouts. European economic review, 71(C), 67-79.
Gross, D. M., & Ryan, M. (2008). FDI location and size: Does employment protection legislation matter? Regional science and urban economics, 38(6), 590-605.
Gupta, R. (2020). Impact of FDI on employment: Evidence from India. Yale University.
Habib, M. D., & Sarwar, S. (2013). Impact of foreign direct investment on employment level in Pakistan: A time series analysis. Journal of law, policy and globalization, 10(2), 46-55.
Hale, G., & Xu, M. (2016). FDI effects on the labor market of host countries. Working Paper No. 2016-25, University of California.
Havranek, T., & Irsova, Z. (2011). Estimating vertical spillovers from FDI: Why results vary and what the true effect is. Journal of international economics, 85(2), 234-244.
Hejazi, W., & Trefler, D. (2019). Implications of Canada`s restrictive FDI policies on employment and productivity. Journal of international business policy, 2(2), 142-166.
Hisarciklilar, M., Gultekin-Karakas, D., & Atil Asici, A. (2014). Can FDI be a Panacea for unemployment? The Turkish case. In Labor and employment relation in a globalized world (pp. 43-70). Springer. 
Hong, E., Lee, I. H., & Makino, S. (2018). Outbound foreign direct investment (FDI) motivation and domestic employment by multinational enterprises (MNEs). Journal of international management, 25(2), 1-22.
Inekwe, J. N. (2013). FDI employment and economic growth in Nigeria. African development review, 25(4), 421-433.
Ivanovic, Z., Baresa, S., & Bogdan, S. (2011). Influence of FDI on tourism in Croatia. UTMS journal of economics, 2(1), 21-28.
Javorcik, B. S. (2014). Does FDI bring good jobs to host countries? World Bank research observer, 30(1), 74-94.
Jenkins, R. (2006). Globalization, FDI and employment in Vietnam. Transnational corporations, 15(1), 115-142.
Joshua, U., & Alola, A. A. (2020). Accounting for environmental sustainability from coal-led growth in South Africa: The role of employment and FDI. Environmental science and pollution research, 27(15), 17706-17716.
Jude, C. (2015). Technology spillovers from FDI: Evidence on the intensity of different spillover channels. The world economy, 39(12), 1947-1973.
Kang, Y., & Whang, U. (2018). To whom does outward FDI give jobs? Open economies review, 29(5), 613-639.
Karlsson, S., Lundin, N., Sjoholm, F., & He, P. (2009). Foreign firms and Chinese employment. The world economy, 32(1), 178-201.
Khumalo, J., & Mosiane, O. (2014). FDI Employment short run dynamics in South Africa: VECM approach. Mediterranean journal of social sciences, 5(20), 522-528.
Kirti, R., & Prasad, S. (2016). FDI impact on employment generation and GDP growth in India. Asian journal of economics and empirical research, 3(1), 40-48.
Kubo, K., & Saito, T. (2012). The effect of mergers on employment and wages: Evidence from Japan. Journal of Japanese international economics, 26(2), 263-284.
Lageweg, N. (2018). Outward FDI and its impact on the home country`s employment: A focus on developed countries. Erasmus University Rotterdam.
Lee, H. H., & Park, D. (2020). Effects of inward and outward Greenfield FDI on employment by domestic firms: The Korean experience. Korea and the world economy, 21(1), 1-33.
Lee, I. H., Hong, E., & Makino, S. (2020). The effect of non-conventional outbound foreign direct investment (FDI) on the domestic employment of multinational enterprises (MNEs). International business review, 29(3), 1-12.
Li, Y., & Liu, L. (2019). FDI employment and economic growth of Beijing city: Mechanism and empirical test. Theoretical economics letters, 9(6), 2070-2084.
Liao, H., Yang, L., Dai, S., & Assche, A. V. (2021). Outward FDI industrial structure upgrading and domestic employment: Empirical evidence from the Chinese economy and the belt and road initiative. Journal of Asian economics, 74(C), 1-12.
Lin, M., & Kwan, Y. K. (2016). FDI technology spillovers geography and spatial diffusion. International review of economics and finance, 43(C), 257-274.
Lin, Y., Qin, Y., & Xie, Z. (2021). Does foreign technology transfer spur domestic innovation? Evidence from the high-speed rail sector in China. Journal of comparative economics, 49(1), 212-229.
Lipsey, R. E. (2001). Foreign direct investment and the operations of multinational firms: Concepts, history and data. Working Paper No. 8665, National bureau of economic research Massachusetts.
Lipsey, R. E. (2004). Home and host country effects of foreign direct investment. In Challenges to globalization: Analyzing the economics (pp.333-379). University of Chicago Press.
Lipsey, R. E. (2006). Measuring the impacts of FDI in central and Eastern Europe. Working Paper No. 12808, NBER.
Lipsey, R. E., & Sjoholm, F. (2004). Foreign direct investment education and wages in Indonesian manufacturing. Journal of development economics, 73(1), 415-422.
Liu, L. (2012). FDI and employment by industry: A co-integration study. Modern economy, 3(1), 16-22.
Liu, W. H., Tsai, P. L., & Tsay, C. L. (2015). Domestic impacts of outward FDI in Taiwan: Evidence from panel data of manufacturing firms. International review of economics and finance, 39(C), 469-484.
Luo, D., Gao, C., & Zhou, J. (2011). FDI China`s non-agricultural employment and urban rural income inequality. In Education and management communications in computer and information science (pp. 247-253). Springer.
Marchewka, A. (2019). The impact of foreign direct investment (FDI) on job creation in rural areas in Poland. Institute of economics and finance.
Mclaren, J., & Yoo, M. (2016). FDI and inequality in Vietnam: An approach with census data. Journal of Asian economics, 48(C), 134-147.
Mehra, N. (2013). Impact of foreign direct investment on employment and gross domestic product in India. International Journal of Economics and Research, 4(4), 29-38.
Moher, D., Shamseer, L., Clark, M., Ghersi, D., Liberati, A., Petticrew, M., Sheklle, P., & Stewart, L. A. (2015). Preferred reporting items for systematic review and meta-analysis protocols (PRISMA-P) 2015 statement. Systematic review, 4(1), 1-9.
Moralles, H. F., & Moreno, R. (2020). FDI productivity spillovers and absorptive capacity in Brazilian firms: A threshold regression analysis. International review of economics and finance, 70(C), 257-272.
Noori, F., Delangizan, S., & Rezaee, B. (2021). The Employment Effect of Technology Transfer Methods: A Systematic Review. Journal of entrepreneurship development, 14(2), 341-360. (In Persian).
Norback, P. J., Skedinger, P., & Duanmu, J. L. (2020). Employment protection and FDI revisited: New evidence from micro data. The world economy, 44(3), 645-670.
Nordin, S. (2017). Does FDI influence employment in Malaysia? Journal of advanced research in business and management studies, 8(1), 85-94.
OECD. (2008). The impact of foreign direct investment on wages and working conditions. OECD.
Olatunji, O. R., & Uwalomwa, U. (2009). Psychological effects of mergers and acquisition on employees: Case study of some selected banks in Nigeria. World review of entrepreneurship, Management and Sustainable Development, 5(1), 102-115.
Onaran, O. (2009). The effect of trade and FDI on employment in central and Eastern European countries: A country specific panel data analysis for the manufacturing industry. In The EU and Emerging Markets (pp.71-94). Springer.
Onley, W. W. (2013). A race to the bottom? Employment protection and foreign direct investment. Journal of international economics, 91(2), 191-203.
Osabohien, R., Awolola, O. D., Matthew, O., Itua, O. Q., & Elomien, E. (2020). Foreign direct investment inflow and employment in Nigeria. Investment management and financial innovations, 17(1), 77-84.
Paniagua, J. (2014). Does FDI in China displace foreign jobs in Asia? International journal of economics and finance, 6(11), 52-59.
Pidal, J., Hrobjartsson, A., & Jorgensen, K. J. (2007). Impact of allocation concealment on conclusions drawn from meta-analyses of randomized trials. International journal of epidemiology, 36(4), 847-857.
Pourmand Bakhshayesh, T., Sadeghi Shahdani, M., & Vejdani, M. (2020). Spatial survey on the impact of export and foreign direct investment on employment (Selected MENA countries). New economy and trade, 15(2), 1-27. (In Persian).
Rizvi, S. Z. A., & Nishat, M. (2009). The impact of foreign direct investment on employment opportunities: Panel data analysis: Empirical evidence from Pakistan, India and China. The Pakistan development review, 48(4), 841-851.
Rong, S., Liu, K., Huang, S., & Zhang, Q. (2020). FDI labor market flexibility and employment in China. China economic review, 61(C), 1-16.
Sandrson, S., Tatt, I. D., & Higgins, J. P. (2007). Tools for assessing quality and susceptibility to bias in observational studies in epidemiology: A systematic review and annotated bibliography. International Journal of Epidemiology, 36(3), 666-676.
Santos-Paulino, A. U., & Wan, G. (2009). Special section: FDI, employment, and growth in China and India. Review of development economics, 13(4), 737-739.
Saucedo, E., Ozuna, T., & Zamora, H. (2020). The effect of FDI on low and high skilled employment and wages in Mexico: A study for the manufacture and service sectors. Journal of labor market research, 54(9), 1-15.
Schaffler, J., & Michael, M. (2018). German FDI in the Czech Republic: Employment effects in the home country. Working Paper No. 6/2018, Institut fur Arbeitsmarkt- und Berufsforschung (IAB).
Seyednourani, S. M., & Mohammadpour, H. (2018). The impact of foreign direct investment on employment in OECD and developing countries. New economy and commerce, 13(2), 53-79. (In Persian).
Shahabadi, A., Valinia, S. A., & Ansari, Z. (2013). The effects of technology spillover resulted from foreign direct investment on the industry performance. Roshed e Fannavari, 9(33), 13-25. (In Persian).
Sharma, A., & Cardenas, O. (2019). The labor market effects of FDI: A panel data evidence from Mexico. International economic journal, 32(4), 572-588.
Sohaili, K., Fatahi, Sh., & Mohammadi, S. (2018). Investigating the role and effects of private and public investment on employment in provinces of Iran: GMM approach. Macroeconomics research letter, 12(24), 121-148. (In Persian).
Stavropoulos, S., Burger, M. J., & Dufourmont, J. (2020). Urban circular policies and employment through Greenfield FDI. Sustainability, 12(4), 1-10.
Sustersic, T. G., & Kejzar, K. Z. (2020). The role of skilled migrant workers in FDI related technology transfer. Review of world economics, 156(5), 103-132.
Taghdisi-Rad, S. (2012). Macroeconomic policies and employment in Jordan: Tackling the paradox of job poor growth. Working Paper No. 118, International Labor Organization.
Tang, D., & Gyasi, K. B. (2012). China Africa foreign trade policies: The impact of China’s foreign direct investment (FDI) flow on employment of Ghana. Energy Procedia, 16(A), 553-557.
Tian, X. (2007). Accounting for sources of FDI technology spillovers: Evidence from China. Journal of international business studies, 38(1), 147-159.
Todo, Y., Zhang, W., & Zhou, L. A. (2009). Knowledge spillovers from FDI in China: The role of educated labor in multinational enterprises. Journal of Asian economics, 20(6), 26-639.
Tricco, A. C., Tetzlaff, J., Sampson, M., Fergusson, D., Cogo, E., Horsley, T., & Mohr, D. (2008). Few systematic reviews exist documenting the extent of bias: A systematic review. Journal of clinical epidemiology, 61(5), 422-434.
Tshepo, M. (2014). The impact of foreign direct investment on economic growth and employment in South Africa: A time series analysis. Mediterranean journal of social sciences, 5(25), 18-27.
Udemba, E. N. (2020). Ecological implication of offshored economic activities in Turkey: Foreign direct investment perspective. Environmental science and pollution research, 27(30), 38015-38028.
Uman, L. S. (2011). Systematic reviews and meta-analyses. Journal of the Canadian Academy of Child Adolescent Psychiatry, 20(1), 57-59.
United Nations Conference on Trade and Development. (2021). World investment report 2021. United Nations Conference on Trade and Development.
Vallejo, B., & Mekonnen, T. G. (2021). Foreign direct investment (FDI) and learning in Ethiopia`s textile and garment sector. Working Paper No. 25, African Innovation Research.
Veroniki, A. A., Jackson, D., Bender, R., Kuss, O., Langan, D., Higgins, J. P. T., Knapp, G., & Salanti, G. (2018). Methods to calculate uncertainty in the estimated overall effect size from a random-effects meta-analysis. Research synthesis methods, 10(1), 23-43.
Waldkirch, A., Nunnenkamp, P., & Bremont, J. E. A. (2009). Employment effects of FDI in Mexico`s non maquiladora manufacturing. The journal of development studies, 45(7), 1165-1183.
Wang, D. T., Gu, F. F., Tse, D. K., & Yim, C. K. (2013). When does FDI matter? The roles of local institutions and ethnic origins of FDI. International business review, 22(2), 450-465.
Wiafe, E., & Anning, L. (2021). Effects of SINO FDI on the growth of South Africa. International economics, 74(1), 1-24.
Wilkins, M. (1970). The emergence of Multinational enterprise: American business abroad from the colonial era to 1914. Harvard university press.
Wong, K. N., & Tang, T. C. (2010). Foreign direct investment and employment in manufacturing and services sectors. Journal of economic studies, 38(3), 313-330.
Yeboah, E., & Kyeremeh, R. G. (2021). An overview of employment generation in the sectors of Ghana`s economy: Foreign direct investment perspective. Global journal of business economics and management, 11(1), 48-57.
Zeb, N., Qiang, F., & Sharif, M. S. (2014). Foreign direct investment and unemployment reduction in Pakistan. International Journal of Economics and Research, 5(2), 10-17.
Zhuang, H. (2011). The effect of FDI on local education expenditures: Evidence from the United States. Bulletin of economic research, 65(3), 203-224.
Macroeconomics Research Letter
Volume 16, Issue 32
December 2021
Pages 65-90

Files

History

  • Receive Date: 25 June 2022
  • Revise Date: 03 September 2022
  • Accept Date: 11 September 2022

Share

How to cite

Statistics