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Foreign direct investment and employment in manufacturing and services sectors: Fresh empirical evidence from Singapore


  • Koi Nyen Wong
  • Tuck Cheong Tang


Purpose - This paper aims to examine both the cointegrating and causal relationships among inward FDI and the host country's employment in manufacturing and services sectors. Design/methodology/approach - This paper applies autoregressive distributed lag (ARDL) framework to test the cointegration and causality patterns using Singapore as a case. Findings - Apart from the presence of a unique long-run relationship, the findings also show evidence of long-run causality, running from employment in manufacturing and services to FDI inflows, and from FDI inflows and services employment to manufacturing employment. Furthermore, there is evidence of short-run causality showing strong FDI-employment and employment linkages, predominantly from the manufacturing to services. Research limitations/implications - One likely area of future research is to extend this paper by using disaggregated data, e.g. FDI inflows by sector (manufacturing and services), and employment by the respective sectors. Practical implications - Manufacturing and services have been regarded as the “twin engines” of growth for the Singapore economy. As the economy is moving up the value chain from downstream to upstream activities, a significant proportion of foreign direct investment (FDI) has been attracted to the manufacturing and services sectors. The present study provides useful policy implications towards promoting foreign investment in emerging areas of and manpower development in both sectors of the economy. Originality/value - This paper explores the possible interactions between FDI inflows and employment in manufacturing and services sectors as well as the employment linkages between manufacturing and services in Singapore.

Suggested Citation

  • Koi Nyen Wong & Tuck Cheong Tang, 2011. "Foreign direct investment and employment in manufacturing and services sectors: Fresh empirical evidence from Singapore," Journal of Economic Studies, Emerald Group Publishing, vol. 38(3), pages 313-330, August.
  • Handle: RePEc:eme:jespps:v:38:y:2011:i:3:p:313-330

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    References listed on IDEAS

    1. 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..
    2. 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 629-646, Special I.
    3. 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.
    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. 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.
    6. 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.
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    Cited by:

    1. Dellis, Konstantinos & Sondermann, David & Vansteenkiste, Isabel, 2017. "Determinants of FDI inflows in advanced economies: Does the quality of economic structures matter?," Working Paper Series 2066, European Central Bank.

    More about this item


    Causality; Foreign direct investment; Employment; Singapore;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements


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