An Empirical Analysis on the Relationship between Foreign Direct Investments and Employment

This paper investigates long-run relationships between both FDIs (Foreign Direct Investments) – outward FDI and inward FDI – and employment. There continues to be dissent with regards to the effects of both FDIs on employment. Based on the empirical results, the effects of both FDIs on the employment in Korea have been changed after 2000. In particular, the negative effect of inward FDI in the past has diminished in the 2000s. Meanwhile, the positive effect of outward FDI decreased after 2000. The implications from the empirical analysis are following: An outward FDI should be encouraged to trigger a virtuous circle between a foreign corporation established/obtained by outward FDI and a domestic firm. The positive effect of inward FDI on domestic employment should be stabilized via learning-by-doing effect of advanced technology and service system from the foreign capital