Foreign direct investment inflows and labor productivity in Pakistan: A sector-wise panel cointegration analysis

Ayesha Serfraz

No 65, ZÖSS-Discussion Papers from University of Hamburg, Centre for Economic and Sociological Studies (CESS/ZÖSS)

Abstract: Developing economies tremendously benefit from FDI inflows since it leads to their economic growth. This study empirically analyzes the effects of sector-wise FDI inflows on respective sector-wise labor productivity for a panel of seven major sectors of Pakistan's economy covering time period of 1997-2016. In empirical analysis sector-wise FDI inflows has been used as an independent variable while sector-wise labor productivity is a dependent variable. Initial tests conclude that LSDV fixed effects model is the most appropriate test for the data being used for empirical analysis. Further tests confirm the existence of a long run Cointegration between these two variables. Wald test shows that a uni-directional short-run causality exists, running from sector-wise labor productivity to sector-wise FDI inflows. Pair-wise Granger-Causality test further shows that the effects of FDI inflows are not limited to one sector, rather there is an evidence of spillover effect from one sector to an-other. All empirical tests conclude that sector-wise FDI inflows positively affect sector-wise labor productivity in case of Pakistan.

Keywords: Sector-wise FDI Inflows; Sectors-wise labor Productivity; Panel Cointegration; Pakistan (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-eff and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cessdp:65

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