FDI, labor market flexibility and employment in China

Shu Rong, Kai Liu, Si Huang and Qi Zhang

China Economic Review, 2020, vol. 61, issue C

Abstract: This paper discusses the influence and underlying mechanisms of foreign direct investment (FDI) and the labor market on Chinese employment. We analyze data from 30 Chinese provinces and municipalities over the period 2000–2015, in the first instance to examine employment effects of both FDI and labor market flexibility through the moderating effect; here we verify the moderating effect with respect to labor market flexibility. Second, using subsamples, we explore the effects of regional and skill differences on the employment. Finally, to test the three mechanisms, we employ a mixed model of moderating and mediating effects. Contrary to previous studies, we observe a positive employment effect of FDI, with labor market flexibility playing a significant positive moderating role, a 1% increase in FDI is associated with an expected employment increase of 0.216. Additionally, wages, human capital, and R&D investment play positive mediating roles when labor market flexibility moderates the employment effect of FDI.

Keywords: FDI; Labor market flexibility; Employment; Wage; Human capital (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:61:y:2020:i:c:s1043951x20300468

DOI: 10.1016/j.chieco.2020.101449

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