Asymmetric effects of foreign direct investment on employment in an oil producing country: Do human capital, institutions and oil rents matter?

This article explores the asymmetric impacts of FDI for employment in an oil producing country. Its objective is to verify the nonlinearity of FDI's effects for employment and to examine the extent of significance of specific factors in efficiency-seeking, which are human capital and institutional development, in oil producing countries such as Saudi Arabia. The Non-Linear Autoregressive Distributed Lag (NARDL) method is applied to identify asymmetric impacts from FDI for job creation during the period 1984–2015. The NARDL findings show that positive changes in FDI exert no short-run impact on employment and exert a negative longer-term impact. Moreover, the negative changes in FDI exhibit a long- and short-run negative effect on job creation. The findings also show that human capital has a positive conditioning influence on the effects of FDI on employment over the long term, as does law and order. In the short-run, there is a positive moderating role from human capital, while that of law and order is negative in the relation between employment and FDI. Our study indicates that oil rents can only promote employment over the nearer-term period, while its longer-term impact on job creation is negative.