Impacts of FDI Presence and Product Sophistication on the Demand for Skilled and Unskilled Labour: Evidence from SMEs in Viet Nam

Quang Hoan Truong and Dong Van Chung
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Quang Hoan Truong: Institute for Southeast Asian Studies, Viet Nam Academy of Social Sciences (VASS)
Dong Van Chung: Viet Nam Academy of Social Sciences (VASS)

No DP-2022-40, Working Papers from Economic Research Institute for ASEAN and East Asia (ERIA)

Abstract: This study employs data from the Viet Nam Enterprise Survey (VES) for 2007 and 2011 to examine the effect of foreign direct investment (FDI) and product sophistication as well as the interaction between these two factors on the skilled and unskilled labour demand on Viet Nam's small and medium-sized enterprises (SMEs). It finds that the FDI presence in the same industry but different regions-and FDI in the same region but different industries - has a positive effect on the skilled labour demand and a negative impact on the unskilled labour demand. FDI in the same industry has a negative effect on the skilled labour demand and an advantageous impact on the unskilled labour demand. The product sophistication index is found to positively affect the skilled labour demand but decreases the demand for unskilled labour. When interacting with product sophistication, FDI presence in the same industry and region positively affects the skilled labour demand. The study also finds the opposite impacts of different types of FDI presence as well as the interaction between FDI presence and product sophistication on the demand for highly, medium-, and basic-skilled labour. Thus, it is important to consider the opposite effects of different types of FDI and the interaction between FDI presence and product sophistication on SME labour demand by skills level.

Keywords: FDI presence; Product sophistication; SMEs; Skilled and unskilled labour demand; Viet Nam (search for similar items in EconPapers)
JEL-codes: F15 F23 J23 (search for similar items in EconPapers)
Date: 2023-02-02
New Economics Papers: this item is included in nep-fdg, nep-int, nep-sbm and nep-sea
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