IDEAS home Printed from https://ideas.repec.org/a/gam/jecomi/v13y2025i5p127-d1650480.html
   My bibliography  Save this article

Asymmetric Effects of Foreign Worker Employment on Sectoral Labor Productivity: A Malaysian Perspective

Author

Listed:
  • Neng Long Hii

    (Faculty of Economics and Business, Universiti Malaysia Sarawak, Kota Samarahan 94300, Malaysia)

  • Evan Lau

    (Faculty of Economics and Business, Universiti Malaysia Sarawak, Kota Samarahan 94300, Malaysia)

Abstract

This study examines the asymmetric effects of foreign worker employment and low educational attainment on labor productivity across Malaysia’s three main economic sectors—agriculture, industry, and services—from 1991 to 2019 using the nonlinear autoregressive distributed lag (NARDL) model. Three sectoral models are estimated to capture how overdependence on foreign workers and low-skilled local labor influences productivity. Model 1 for agriculture underscores positive variations vis-à-vis how foreign worker employment boosts agricultural productivity in both the short and long term. However, negative variations lead to diminished productivity in the long run. Primary education negatively affects long-term agricultural productivity. In Model 2 for industry, neither foreign worker employment nor low educational attainment significantly affects productivity. Model 3 for services reveals a short-term boost in productivity with increased foreign workers’ employment, whereas reduced employment enhances long-term productivity. The absence of formal education is detrimental to long-term service productivity, while primary education affects it negatively in the short term. NARDL multiplier graphs and Wald tests confirm significant long-run asymmetric effects of foreign labor in the agriculture and services sectors. The findings highlight the need for Malaysia to reduce reliance on low-skilled labor and accelerate its transition toward a high-skilled workforce to sustain productivity growth and economic competitiveness.

Suggested Citation

  • Neng Long Hii & Evan Lau, 2025. "Asymmetric Effects of Foreign Worker Employment on Sectoral Labor Productivity: A Malaysian Perspective," Economies, MDPI, vol. 13(5), pages 1-21, May.
  • Handle: RePEc:gam:jecomi:v:13:y:2025:i:5:p:127-:d:1650480
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7099/13/5/127/pdf
    Download Restriction: no

    File URL: https://www.mdpi.com/2227-7099/13/5/127/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Benos, Nikos & Karagiannis, Stelios, 2016. "Do education quality and spillovers matter? Evidence on human capital and productivity in Greece," Economic Modelling, Elsevier, vol. 54(C), pages 563-573.
    2. Bashir, Saima & Herath, Janaranjana & Gebremedhin, Tesfa G., 2012. "An Empirical Analysis of Higher Education and Economic Growth in West Virginia," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124829, Agricultural and Applied Economics Association.
    3. Atif Awad & Ishak Yussof & Norlin Khalid, 2018. "Output growth of the Malaysia’s manufacturing sector – do foreign workers matter?," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 45(4), pages 876-895, September.
    4. Gary S. Becker, 1964. "Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, First Edition," NBER Books, National Bureau of Economic Research, Inc, number beck-5, July.
    5. Luxolo Malangeni & Andrew Phiri, 2018. "Education and Economic Growth in Post-apartheid South Africa: An Autoregressive Distributive Lag Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 8(2), pages 101-107.
    6. Abdullah Al Mamun & Naeem Hayat & Muhammad Mohiuddin & Anas A. Salameh & Syed Shah Alam, 2023. "Green Gardening Practices Among Urban Botanists: Using the Value-Belief-Norm Model," SAGE Open, , vol. 13(3), pages 21582440231, July.
    7. Zheng WEI & Rui HAO, 2011. "The Role Of Human Capital In China'S Total Factor Productivity Growth: A Cross‐Province Analysis," The Developing Economies, Institute of Developing Economies, vol. 49(1), pages 1-35, March.
    8. Kwabena Gyimah-Brempong, 2011. "Education and Economic Development in Africa," African Development Review, African Development Bank, vol. 23(2), pages 219-236.
    9. Jerik Hanushek & Dennis Kimko, 2006. "Schooling, Labor-force Quality, and the Growth of Nations," Voprosy obrazovaniya / Educational Studies Moscow, National Research University Higher School of Economics, issue 1, pages 154-193.
    10. Shindo, Yuko, 2010. "The effect of education subsidies on regional economic growth and disparities in China," Economic Modelling, Elsevier, vol. 27(5), pages 1061-1068, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Beine, Michel & Noël, Romain & Ragot, Lionel, 2014. "Determinants of the international mobility of students," Economics of Education Review, Elsevier, vol. 41(C), pages 40-54.
    2. Ralph Hippe & Roger Fouquet, 2024. "The Human Capital Transition and the Role of Policy," Springer Books, in: Claude Diebolt & Michael Haupert (ed.), Handbook of Cliometrics, edition 3, pages 411-457, Springer.
    3. Sulis, Isabella & Giambona, Francesca & Porcu, Mariano, 2020. "Adjusted indicators of quality and equity for monitoring the education systems over time. Insights on EU15 countries from PISA surveys," Socio-Economic Planning Sciences, Elsevier, vol. 69(C).
    4. Voxi Heinrich Amavilah & Antonio Rodríguez Andrés, 2024. "Knowledge Economy and the Economic Performance of African Countries: A Seemingly Unrelated and Recursive Approach," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 110-143, March.
    5. Eftimoski, Dimitar, 2022. "On the inconclusive effect of human capital on growth: A new look at extended specifications," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 708-727.
    6. Adesoji O. Farayibi & Oludele Folarin, 2020. "Does Government Education Expenditure Affect Educational Outcomes? New Evidence from Sub-Sahara African Countries," Research Africa Network Working Papers 21/048, Research Africa Network (RAN).
    7. Serge Coulombe & Jean-Francois Tremblay, 2009. "Education, Productivity and Economic Growth: A Selective Review of the Evidence," International Productivity Monitor, Centre for the Study of Living Standards, vol. 18, pages 3-24, Spring.
    8. Adesoji O. Farayibi & Oludele Folarin, 2021. "Does Government Education Expenditure Affect Educational Outcomes? New Evidence from Sub-Sahara African Countries," Working Papers 21/048, European Xtramile Centre of African Studies (EXCAS).
    9. Damir Stijepic, 2021. "A cross-country study of skills and unemployment flows," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 55(1), pages 1-30, December.
    10. Aribah Aslam, 2020. "The hotly debate of human capital and economic growth: why institutions may matter?," Quality & Quantity: International Journal of Methodology, Springer, vol. 54(4), pages 1351-1362, August.
    11. Wößmann, Ludger, 2000. "Specifying Human Capital: A Review, Some Extensions, and Development Effects," Kiel Working Papers 1007, Kiel Institute for the World Economy (IfW Kiel).
    12. Sivropoulos-Valero, Anna Alexandra, 2021. "Education and economic growth," LSE Research Online Documents on Economics 114434, London School of Economics and Political Science, LSE Library.
    13. Anna Valero, 2021. "Education and economic growth," POID Working Papers 006, Centre for Economic Performance, LSE.
    14. Anna Valero, 2021. "Education and economic growth," CEP Discussion Papers dp1764, Centre for Economic Performance, LSE.
    15. Coronel Vicente J. & Díaz-Roldán Carmen, 2024. "Government Expenditure, Education, and Productivity in the European Union: Effects on Economic Growth," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 18(1), pages 1-24.
    16. Žilvinas Martinaitis & Aleksandr Christenko & Jonas AntanaviÄ ius, 2021. "Upskilling, Deskilling or Polarisation? Evidence on Change in Skills in Europe," Work, Employment & Society, British Sociological Association, vol. 35(3), pages 451-469, June.
    17. N. Nazukova, 2020. "State funding of education as a factor of economic growth," Economy and Forecasting, Valeriy Heyets, issue 2, pages 97-119.
    18. Aribah Aslam & Minza Mudassir & Ghulam Ghouse & Abdul Farooq, 2024. "Introducing Modern Human Capital Model," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 6099-6110, June.
    19. Adesoji O. Farayibi & Oludele Folarin, 2021. "Does Government Education Expenditure Affect Educational Outcomes? New Evidence from Sub-Sahara African Countries," Working Papers of the African Governance and Development Institute. 21/048, African Governance and Development Institute..
    20. Prof. Dr. Adem KALCA & Resc. Assist. Atakan DURMAZ, 2012. "Diaspora As The Instrument Of Humane Capital," International Journal of Business and Social Research, LAR Center Press, vol. 2(5), pages 94-104, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jecomi:v:13:y:2025:i:5:p:127-:d:1650480. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.