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FDI, digitalization and employment: empirical evidence from developing economies

Madhabendra Sinha (Department of Economics and Politics, Visva-Bharati University, Santiniketan, India)
Darius Tirtosuharto (Department of Economic and Monetary Policy, Bank Indonesia, Jakarta, Indonesia)
Anjan Ray Chaudhury (Department of Economics, Durgapur Government College, Durgapur, India)
Partha Basu (Department of Humanities and Social Sciences, Indian Institute of Technology Kharagpur, Kharagpur, India)

Studies in Economics and Finance

ISSN: 1086-7376

Article publication date: 30 December 2022




The paper aims to empirically examine the impact of foreign direct investment (FDI) inflows and digitalization on employment opportunities in selected 70 developing economies across the world over the period of 2001–2019. The same empirical investigations are also carried out on two groups of these developing countries created on the basis of the levels of FDI inflows and digitalization.


The study uses various panel unit root tests followed by the estimations of the generalized method of moments in the dynamic panel framework, using secondary data collected from the World Bank (2020), International Labour Organization (2020) and International Telecommunication Union (2020).


Empirical findings reveal that both FDI inflows and digitalization have positive effects on employment; however, the extent of the impact of digitalization is greater than that of FDI inflows in developing economies, mostly in countries with relatively low FDI inflows and low digitalization.


Conventionally, FDI inflows accelerate economic growth and thus improve the labour market in host countries. However, FDI inflows into developing countries with low-skilled labours may limit job creation, particularly during the process of digitalization. This study shows that despite a much moderate impact of FDI inflows, digital transformation supports a higher employment in developing economies with low level of FDI inflows and digitalization.



The authors are grateful to the Bank Indonesia Institute and the Asia-Pacific Applied Economics Association for giving them an opportunity to present an earlier version of this paper in 15th Bulletin of Monetary Economics and Banking International Conference. They are thankful to the Guest Editor Professor Paresh Narayan and anonymous referees of the journal, the session chair, discussants and participants of the conference for providing a number of extremely insightful comments to improve the quality of the paper. Useful disclaimers apply.


Sinha, M., Tirtosuharto, D., Ray Chaudhury, A. and Basu, P. (2022), "FDI, digitalization and employment: empirical evidence from developing economies", Studies in Economics and Finance, Vol. ahead-of-print No. ahead-of-print.



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