The relationship between direct foreign capital investments and industrial employment: The case of Turkey

Developing countries such as Turkey have difficulty in finding resources to finance their investments. Foreign direct investments have an important place in eliminating the negativities created by the capital insufficiency problem. Foreign direct investment, which has increased its impact with the globalization process, affects important parameters in the economic policies of the countries. One of them is employment. This study aims to explain the effect of foreign direct investment on employment from a sectoral perspective. In this study, firstly, the theoretical infrastructure of foreign direct investment investments is given. Then, the sectoral effects of foreign direct investment investments were evaluated and explained with employment indicators. Within the framework of the examinations, it has been determined that it can have positive and negative results on employment In the empirical part of the study, the effects of foreign direct investment on sectoral employment for the period 2005Q3-2020Q3 were examined with the boundary test approach, ARDL, VAR model, Toda-Yamamoto and Granger causality test. The empirical findings have shown that the coefficient between foreign direct investment and industrial sector employment in the first stage is negative and significant. As a result of the long-term relationship obtained, bidirectional causality was determined. In the second stage, no causal relationship was found between foreign direct investment and total employment. In the third stage, it has been shown that the coefficient between the employment of the services sector and foreign direct investment is positive and statistically insignificant. As a result of the analysis in which a long-term relationship was detected, causality could not be determined. Keywords: Foreign Direct Investment, Employment, ARDL, VAR