Modelling the effects of gross value added, foreign direct investment, labour productivity and producer price index on manufacturing employment

Abstract

Purpose of the study: The manufacturing sector plays a crucial role in various countries' economies, especially in developing countries. However, due technology growth and the emerging services sector, the possibilities and abilities of the manufacturing sector to influence economic and employment growth are becoming minimal. Therefore, job creation or destruction within this sector depends on both endogenous and exogenous factors. This study aims to investigate the effect of gross value added, foreign direct investment, labour productivity and producer price index on manufacturing employment.Design/methodology/approach: To achieve the main objective of the study, authors applied the autoregressive distributed lag (ARDL), ECM and Toda-Yamamoto causality approaches to quantitative quarterly data from 1995 to 2020.Findings: The study's findings suggest that both gross value added and producer price index stimulate job growth, while growth in labour productivity and foreign direct investment impede job growth in the manufacturing sector.Recommendations/value: Based on these findings, the study recommends that policymakers and economic stakeholders should implement strategies such as trade openness, as well as currency stabilisation and reduction in corporate taxes to enhance both investment and production. Additionally, government should impose limitations on the FDI level and encourage domestic investment and producer price index to stimulate employment in the manufacturing sector. T HABANABAKIZE P MNCAYIModelling the effects of gross value added, foreign direct investment, labour productivity and producer price index on manufacturing employment