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Foreign Direct Investment And Employment In Manufacturing And Services Sectors: Fresh Empirical Evidence From Singapore

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  • Koi Nyen Wong
  • Tuck Cheong Tang

Abstract

Manufacturing and services have been regarded as the ???twin engines' of growth for Singapore economy. As the economy is moving up the value chain from downstream to upstream activities, a significant proportion of FDI (foreign direct investment) has been attracted to the manufacturing and services sectors. This paper examines the causal relationships between inward FDI and the host country's employment in these two sectors using tri-variate VAR (vector autoregressive) framework. The main findings show evidence of unidirectional causality, running from employment in manufacturing and services to FDI inflows. Furthermore, there is evidence showing strong employment linkages, predominantly from the manufacturing to services. The present study provides useful policy implications towards promoting foreign investment in emerging areas of and manpower development in both sectors of the economy.

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Bibliographic Info

Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 15/08.

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Length: 13 pages
Date of creation: 03 Jun 2008
Date of revision:
Handle: RePEc:mos:moswps:2008-15

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Keywords: Causality; foreign direct investment; employment; Singapore.;

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  1. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
  2. Guerrieri, Paolo & Meliciani, Valentina, 2005. "Technology and international competitiveness: The interdependence between manufacturing and producer services," Structural Change and Economic Dynamics, Elsevier, vol. 16(4), pages 489-502, December.
  3. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
  4. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
  5. Greenhalgh, Christine & Gregory, Mary, 2001. " Structural Change and the Emergence of the New Service Economy," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(0), pages 629-46, Special I.
  6. T.K. Jayaraman & Baljeet Singh, 2007. "Foreign Direct Investment and Employment Creation in Pacific Island Countries: An Empirical Study of Fiji," Working Papers 3507, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
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