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Local labor market effects of FDI: job growth and skills demand in Vietnam

Author

Listed:
  • Thi Hang,Banh
  • Coxhead,Ian
  • Vuong,Dinh Tuan Nguyen

Abstract

Foreign direct investment (FDI) in manufacturing industries creates jobs in laborabundant developing economies, but does it also promote human capital development? We investigate the net contribution of FDI to employment and demand for skills in Vietnam, a country undergoing an economic boom driven by dramatic growth in export-oriented manufacturing. Nearly all job growth within this sector is due to FDI, so direct employment growth and skill mix outcomes largely reflect external choices over production scale and technology. FDI alters local labor markets directly, and also indirectly by stimulating growth and jobs in domestic firms. We estimate local FDI employment multipliers for total jobs and for labor by level of educational attainment. Our study seeks to fill a knowledge gap on the contribution of "factory to the world” strategies to human capital formation and economic growth.

Suggested Citation

  • Thi Hang,Banh & Coxhead,Ian & Vuong,Dinh Tuan Nguyen, 2026. "Local labor market effects of FDI: job growth and skills demand in Vietnam," IDE Discussion Papers 1005, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper1005
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    File URL: https://ir.ide.go.jp/record/2001830/files/IDP001005_001.pdf
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    Keywords

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    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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