The Effect Of Foreign Direct Investments On Unemployment: Evidence From Panel Data For Seven Developing Countries

Abstract

In this study, the relationship between foreign direct investment and unemployment are investigated for 7 developing countries, namely Argentina, Chile, Colombia, Philippines, Thailand, Turkey and Uruguay by using the panel data analysis. Panel unit root, panel cointegration and panel causality tests performed by using yearly data from 1981 to 2009 for all countries show that foreign direct investment and unemployment move together in the long run but although foreign direct investment increases unemployment in Turkey and Argentina, it reduces unemployment in Thailand. However, causality tests only depict that there is a relationship from foreign direct investment to unemployment in the long run.

Keywords

• Foreign direct investments,unemployment,panel unit root,panel cointegration,panel causality.

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