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The impacts of China’s FDI on employment in Thailand’s industrial sector: A dynamic VAR (vector auto regression) approach

Mathavee Keorite (School of Economics, Xiamen University, Xiamen, China)
Mohamed Moubarak (Faculty Saint-Jean, University of Alberta, Edmonton, Canada)

Journal of Chinese Economic and Foreign Trade Studies

ISSN: 1754-4408

Article publication date: 1 February 2016

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Abstract

Purpose

This study aims to analyze the effect of inward foreign direct investment (FDI) on new job creation. This study pays attention to factors interrelated to China’s FDI by using the case of Thailand.

Design/methodology/approach

Using time series data from 2001 to 2014, this paper explores the driving forces and reduction potentials of employment in Thailand’s industrial sector with consideration for dynamic changes within the vector autoregression model.

Findings

The results show that government expenditure plays a dominant role in increasing employment in Thailand’s industrial sector and exports plays a dominant role in decreasing employment in Thailand’s industrial sector. All variables are co-integrated and the analysis of the impulse–response function also turns out to be synchronous. Furthermore, in the short term, exports are more critical than China’s FDI in industrial sectors in reduction potentials of employment in Thailand’s industrial.

Practical/implications

Policies should be devised to increase skilled labour and improve the equality of infrastructure in the country to attract more FDI into the economy and for quick adjustment purposes in case of shock to the system.

Originality/value

The paper uncovers some important factors influencing employment in Thailand’s industrial sector under study and provides a guide-map for policymakers.

Keywords

Acknowledgements

The authors would like to thank the anonymous reviewers for their constructive comments. The early idea of this paper was presented at the 4th Chinese-Thai Strategic Research Seminar, Xiamen, PR China, in 2015.

Citation

Keorite, M. and Moubarak, M. (2016), "The impacts of China’s FDI on employment in Thailand’s industrial sector: A dynamic VAR (vector auto regression) approach", Journal of Chinese Economic and Foreign Trade Studies, Vol. 9 No. 1, pp. 60-84. https://doi.org/10.1108/JCEFTS-09-2015-0023

Publisher

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Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited

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