Does FDI Affect Domestic Employment in OECD Countries?

To verify the employment impact of two-directional FDI, the study analyzes panel data composed of 26 OECD countries from 2006 to 2018 by using the system GMM. Furthermore, we decompose domestic employment into types of industries and skill compositions to identify the heterogeneous employment impact. The results show that inward and outward FDI at lag one period promote domestic employment at the overall level. In terms of workers’ skill levels, lagged inward FDI significantly persistently promotes high-skilled workers’ employment, likewise, the positive employment impact also appears with a time lag in low-skilled labor subgroups. Outward FDI, on the other hand, initially inhibits both high- and low-skilled labor demand, but then changes to a positive effect in the highskilled labor subgroups. Although there is a time difference between inward and outward FDI, it has a significant and positive impact on employment in the manufacturing and service industries. The results indicate that the relationship between manufacturing and service employment is a mutual substitute. To attract international investors, governments should promote a favorable investment climate and maintain stable economic growth. Because low-skilled labor is more susceptible to changes in FDI, policy measures are required to ensure employment stability. KCI Citation Count: 0