Linkages Between Employment and Net FDI Inflow: Insights from Individual as Well as Panel Data for Emerging South Asian Labour Market

Abstract

In emerging labour market, particularly, the direct and indirect association between employment level and foreign direct investment (FDI) in a dynamic economy is non-deniable. Like private and public investments, FDI promotes employment generating agenda and at the same time, sound employment scenario of an economy attracts FDI to inflow. Under this backdrop, the present study attempts to examine whether employment and net FDI inflow have long-run associations and short-run dynamics in South Asian economies for the period 1991–2016. Applying cointegration and Granger causality tests for individual country level and panel cointegration, vector error correction and Wald test on the two standardized variables—employment–population ratio and per capita net FDI inflow—reveal that the two indicators have cointegrating relations for Bangladesh and Nepal and FDI makes a cause to employment generation in Bangladesh only. Further, the panel data exercise shows the existence of long-run or equilibrium relations linking the two indicators without significant error correction results. The Wald test results show that there is short-run causality working from employment ratio to per capita FDI and vice versa. The study, thus, prescribes for ensuring quality environment in the concerned domestic economies of the region so that employment opportunities invite FDI inflow to their territories.

Sectoral Compositions of Output and Employment in India: Are We Moving Towards Jobless, Job-loss or Job-enabled Growth?

“…Further, in the short run, there are short-run causalities running from demand components to unemployment for India which means, aggregate demand components in India influence its unemployment rates. Also, Das and Ray (2019) investigate the role of FDI upon employment for individual and panel of the South Asian countries and find no cointegrating result for India, although, the results for the panel data reveal such cointegrating relation. In another study, Das and Ray (2020) examine the relationships between globalisation and employment in individual as well as panel of the countries in South Asia and find no long-run relations between the two for India as well as the panel of the countries.…”

“…Tariff raj was a major cause that had afflicted the employment generation mechanism before liberalisation; the scenario transformed in post-liberalisation age. Das and Ray (2019) examine whether there are long-run equilibrium relationships among unemployment and the demand components and directions of their interplays in long- and short-run frameworks. The results show that the series for demand and unemployment are cointegrated that justifies long-run associations among them.…”

Effect of financial sector development and FDI inflow on employment rate in South Asia: New empirical evidence from ARDL approach

“…It plays a constructive role in engaging the labor force of the host country by establishing new business opportunities. Das and Ray (2020) reveal that the net inflow of FDI causes more employment generation in Nepal and Bangladesh. Their analysis further reveals the short‐term causality nexus between per‐capital FDI inflow and employment ratio.…”