The Long Run and Causality Relationship Between Entry Modes of Foreign Direct Investment (Fdi) Towards Unemployment: Evidence in Developing and Developed Asian Countries

Abstract

This paper attempt to investigates the long-run relationship and causality relationship between entry mode of foreign direct investment (FDI) and unemployment for the period of 2006 until 2015 (10 years) in developing and developed Asian countries via panel unit roots, panel cointegration analysis and panel granger causality tests. In order to determine the order of integration variables, the panel unit root tests were carried out in this study. We employed Pedroni’s panel cointegration test for long-run cointegration relationship and the panel
Granger causality test has been employed to determine the causality relationship in this study. The results of the panel cointegration test shown that only developing Asian countries have a long-run relationship between entry modes and unemployment. While for the causality relationship test revealed a mixed finding where
the brownfield investment does have granger cause on unemployment in developing Asian countries but for developed countries show the other around that unemployment granger cause on brownfield investment and slightly significant for causality relationship greenfield investment between unemployment. Additionally, the results also explicated that the inflow of foreign direct investments are attracted in both developing and developed Asian countries where there is the existence of an available workforce as shown in granger cause results. Thus, this study concludes that the entry modes of FDI; brownfield and greenfield investment are significant granger cause on unemployment and has a long-run relationship in developing Asian countries
compared to developed Asian countries.