Keyword

Greenfield investment, Brownfield investment, foreign direct investment, unemployment, Fixed Effects Instrumental Variables

Abstract

This study attempts to examine the impact of entry modes of foreign direct investment (FDI) namely Greenfield investment and Brownfield investment towards unemployment in 25 Asian countries over the period of 2006 – 2015 (10 years) where the countries were divided into three groups: total, developing and developed Asian countries. The Breuch-Pagan Lagrange Multiplier test has been used to determine whether Ordinary Least Square or Fixed Effect-Instrumental Variables is appropriate for this study. In order to avoid the endogeneity problem that usually occurs in the panel data analysis, this study includes instrumental variables in the fixed effect estimators. The results depict mixed findings where both total and developed Asian countries are negatively significant between FDI and unemployment while both of the entry modes are insignificant. However, for the case of developing Asian countries, this study found insignificant and positive relationship between FDI and unemployment, while both entry modes of FDI were negatively significant towards unemployment. Thus, this study concludes that the entry modes of FDI are significant to reduce unemployment in developing Asian countries compared to developed Asian countries. 


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