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Foreign Direct Investments and Employment. Structural Analysis

Dorin Jula () and Nicolae Jula ()

Journal for Economic Forecasting, 2017, issue 2, 29-44

Abstract: We analyze the impact induced by Foreign Direct Investments on changing the sectoral structure of employment. By developing a general methodological framework, we show that, for the dynamics of the structure analysis, the appropriate model is a panel data with time specific fixed effects and with cross-section specific effects, weighted by the growth rate of total employment. To analyze the change in structures, the appropriate model is, likewise, a panel data, without time specific (fixed or random) effects, but with cross-section specific ones, weighted by total employment. We find that for Agriculture, forestry and fishery, Manufacturing and Accommodation and food services, the growth of FDI was associated with a decrease in industry share in total employment, both at global level, as well as regarding the private and public employment structures. This means that, for the industries concerned, the FDI effect on productivity improvement was superior to the effect induced on employment growth. For Mining, Electricity, Natural gas and water, Information technology and communications, Financial intermediation and insurance, Professional, scientific, technical and administrative activities and support services the effect is positive for the private sector and negative for the public one. For the remaining industries (Construction and real estate transactions, Trade, Transportation) the effects of FDI was rather positive than otherwise. Consequently, for those industries, the FDI effect on employment growth exceeds that on productivity.

Keywords: Foreign Direct Investment; industry structure of employment; panel data models (search for similar items in EconPapers)
JEL-codes: C33 F21 J21 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:rjr:romjef:v::y:2017:i:2:p:29-44