What Determines Job Creations from FDI Inflow to Africa?

Abstract

Africa is a continent with a high proportion of the youthful population, stagnated economic growth, and high unemployment. The policymakers and researchers try to find the job creation determinants in Africa, which would be a potential solution for prolonged unemployment in Africa. The paper analyzed what determine the employment benefits from FDI inflow to Africa through examining the industry, the differentials of per unit FDI job creation among home countries of multinational enterprises (MNEs) as well as the host countries using pooled cross-sectional data from Financial Times (2003-2017). The paper employs Ordinary Least Squared (OLS) and Two-Stage Least Squared (2SLS) techniques. The key findings show that employment benefits from FDI inflow vary across the host countries due to different levels of local labor quality and industrial investment.  The study also reveals that the per-unit FDI job creation varies across source countries because of MNE’s labor-intensity and sector concentration heterogeneity. This sample covers all 54 African countries.

Keywords: Greenfield FDI, Brownfield FDI, Job Creation, MNEs, Sector.

DOI: 10.7176/DCS/11-3-04

Publication date:March 31^st 2021