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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Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number
15/08.
Find related papers by JEL classification: E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
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