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Was Latin America Correct In Relying In Foreign Direct Investment To Improve Employment Rates?

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  • Diego E. Vacaflores

Abstract

This paper examines the effect of foreign direct investment (FDI) on employment generation for a group of Latin American countries in the period 1980-2006. Using a dynamic panel model, which is estimated with the Arellano-Bover/Blundell-Bond system estimator, I find that FDI has a positive and significant effect on the employment generation in host countries, which is driven by its effect on male labor force. This positive effect is particularly important for less developed economies, periods with low inflation, and for the later period of the sample, but suggests that only countries with high level of informality and those attracting low average inflows of FDI accrue this benefit.

Suggested Citation

  • Diego E. Vacaflores, 2011. "Was Latin America Correct In Relying In Foreign Direct Investment To Improve Employment Rates?," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 11(2).
    • Handle: RePEc:eaa:aeinde:v:11:y:2011:i:2_8
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    3. Mogab, J. & Kishan, R. & Vacaflores, D.E., 2013. "Labor Market Rigidity And Foreign Direct Investment: The Case Of Europe," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(1), pages 35-54.
    4. Mina, Wasseem & Jaeck, Louis, 2015. "Labor Market Flexibility and FDI Flows: Evidence from Oil-Rich GCC and Middle Income Countries," MPRA Paper 62652, University Library of Munich, Germany.
    5. Ceyhun Elgin, 2021. "Foreign direct investment, informality and technology transfer," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 994-1015, May.
    6. Wasseem Mina, 2018. "Labor Market Policies and FDI Flows to GCC Countries," Working Papers 1201, Economic Research Forum, revised 27 May 2018.
    7. Mina, Wasseem, 2020. "Do GCC market-oriented labor policies encourage inward FDI flows?," Research in International Business and Finance, Elsevier, vol. 51(C).
    8. Kazi Mohammed Kamal Uddin & Munem Ahmad Chowdhury, 2020. "Impact of FDI on Employment Level in Bangladesh: A VECM Approach," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 8(1), pages 30-37.
    9. Dani Rahman Hakim & Eeng Ahman & Kusnendi Kusnendi, 2023. "The effect of FDI on the host countries' employment: A meta-regression analysis," Russian Journal of Economics, ARPHA Platform, vol. 9(2), pages 158-182, July.
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    More about this item

    Keywords

    Trade and Labor Market Interactions; Foreign Direct Investment; Employment; Latin America & Caribbean;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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