[FDI and its employment effect in ASEAN and Vietnam]

by

ACKNOWLEDGEMENT

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

DECLARATION

I, [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

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ABSTRACT

The purpose of this paper is to shed light on the effects of inward foreign direct investment on productivity in the ASEAN and Vietnamand Vietnam economies. The main novelty is the analysis of the spillover effects of inward FDI that may occur from the entry of multinational enterprises and the regional economic integration. In doing so, the causality between FDI and total factor productivity growth was taken into account. The causality analysis was made in five ASEAN and Vietnameconomies using country-specific historical data from 1990 to 2011. We provided a variety of analytical testing, including unit root testing, cointegration testing, and Granger causality testing.

ABSTRACT4

CHAPTER 1: INTRODUCTION6

Introduction6

Aim of the Study9

Study Rationale10

Hypothesis10

CHAPTER 2: LITERATURE REVIEW11

Vietnam's integration with the global economy11

Productivity Spillovers from FDI12

MNE employment has a direct and indirect impact on domestic employment:19

MNE employment boosts wages in host countries:19

MNE employment fosters technological transfers:19

MNE employment enhances the productivity of the labor force in host country:20

Implications for the Employment Effects of FDI20

Trends in ASEAN and Vietnamregion24

Importance of Employment24

Trends of FDI in ASEAN and Vietnamregion25

Trends of Employment in ASEAN AND VIETNAMregion31

CHAPTER 3: DATA AND METHODOLOGY37

Qualitative data VS Quantitative data37

Data37

Modeling and methodology38

Unit root test38

Cointegration test39

Johansen Cointegration test41

Granger Causality test43

CHAPTER 4: EMPERICAL ANALYSIS45

Testing for Unit Root45

Testing for Cointegration50

Testing for Causality51

Indirect employment effects57

CHAPTER 5: CONCLUSION60

REFERENCES62

CHAPTER 1: INTRODUCTION

Introduction

The impact of globalization on employment is a central issue of contemporary political economy. From the point of view of workers in developed countries, globalization is often seen as a threat as traditional industrial jobs disappear or are relocated around the globe (and not just traditional jobs, as the recent expansion of call centres in India and elsewhere illustrates). On the other hand, increased employment in developing countries is seen as a major contribution to reducing poverty and meeting the Millennium Development Goals. However, the impact of globalization on labour markets and the mechanisms through which closer integration with the global economy may lead to job creation are still a subject of debate

Foreign direct investment (FDI) plays a key role in the economic growth of the Association of South East Asian Nations (ASEAN and Vietnam). The FDI inflows to the ASEAN and Vietnamhave grown dramatically in the last decade, increasing about 86% from 1995 to 2005. FDI is seen as an important channel for obtaining employment opportunities, human capital development, higher wages, technology transfer, and infrastructure improvement. In other words, FDI is often seen as a vehicle for an increase in productivity and efficiency, and consequently as a driver for economic ...