Exploring the Employment Effect of FDI in BRICS: Does Conditionalities Matter?

The study investigated the conditions that should exist in the BRICS (Brazil, Russia, India, China, South Africa) countries in order to enhance FDI’s influence on employment creation using panel data analysis methods with data ranging from 1994 to 2014. Although literature shows that the positive influence of FDI on employment generation is in the majority, channels through which FDI affects employment is an area which has so far been completely ignored by empirical researchers. To the best of the author’s knowledge, this study is the first to investigate channels through which FDI influences employment. The findings according to both pooled ordinary least squares (OLS) and fixed effects shows that high levels of economic growth, human capital and financial development should be available in the BRICS countries in order for FDI’s positive influence on employment generation to be accelerated. The study therefore urges BRICS countries to implement policies that enhances financial development, economic growth and human capital development in order to realise employment creation benefits triggered by FDI inflows. Future studies should investigate if there are other conditions apart from these three which must exist in the BRICS countries in order to accelerate the realisation of FDI triggered employment generation advantages.