The effects of foreign direct investments inflows on employment

Due to capital shortages in underdeveloped and developing countries, adequate levels of investment cannot be achieved. As a result of the low levels of investment, the production levels in these countries also remain low. The low level of production leads to a lack of demand for labor, which in turn results in limited employment opportunities. Underdeveloped and developing countries gained the opportunity to benefit from international capital as a result of the liberalization policies of the 1980s. Foreign direct investment, a form of international capital movement, is particularly attractive to underdeveloped and developing countries as a desired investment. Foreign direct investment brings not only capital but also elements that positively affect the production process, such as technology, technical expertise, and management knowledge, offering significant opportunities for underdeveloped and developing countries experiencing capital shortages. One of these opportunities is the expectation of an increase in the country's investment levels. It is believed that an increase in investments will lead to an increase in the production process, and consequently, an increase in the employment level in the country. Foreign direct investment can enter a country in various forms, such as establishing a new company, acquiring an existing company, or partnering with an existing company. The different types of foreign direct investment can lead to varying impacts on employment, both in terms of direction and magnitude. In this thesis, the impact of foreign direct investment on employment was analyzed using data from 22 upper-middle-income countries for the period 2000-2022. Panel regression and the Dumitrescu and Hurlin panel causality test methods were employed as the analysis techniques. The analysis revealed that foreign direct investments negatively affect employment in the respective countries. Additionally, evidence was found indicating a bidirectional causality relationship between foreign direct investment and employment.