Foreign direct investment, economic growth, and unemployment: Evidence from developing countries

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Abstract

High unemployment is one of the major difficulties confronting most modern countries, putting social, economic, and political strain on policymakers. Foreign direct investment (FDI) is critical to a country’s economic development, particularly in transitional economies. FDI is a major source of capital inflows to developing countries. FDI affects the level of employment in the host country, in addition to its many other effects. The research is based on the studies of Johnny, Timipere, and Krokeme (2018) and Zeb, Qiang, and Sharif (2014) that have examined these variables in this paper. This study investigates the relationship between FDI, economic growth, and unemployment to quantify and assess the relationship in selected developing countries or Western Balkans countries according to these variables. Data for the developing countries of Western Balkan were collected in the observed period 2015–2019. Differences between countries were explored in terms of FDI, gross domestic product (GDP), and unemployment using the data produced from the one-way analysis of variance (ANOVA) test. According to regression analysis, FDI and GDP have a considerable impact on country unemployment. The results showed that FDI and GDP have an effect in decrease unemployment in the developing countries examined.

Keywords: Foreign Direct Investment, Gross Domestic Product, Unemployment, Developing Countries

Authors’ individual contribution: Conceptualization — H.K. and A.N.; Methodology — H.K., A.N., and V.U.; Validation — H.K. and A.N.; Formal Analysis — A.N. and V.U.; Investigation — H.K. and A.N.; Resources — A.N. and V.U.; Data Curation — A.N. and V.U.; Writing — Original Draft — H.K., A.N., and V.U.; Visualization — H.K., A.N., and V.U.; Supervision — H.K. and A.N.; Project Administration — A.N.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: E22, E24

Received: 06.12.2021
Accepted: 18.05.2022
Published online: 20.05.2022

How to cite this paper: Kukaj, H., Nimani, A., & Usaj, V. (2022). Foreign direct investment, economic growth, and unemployment: Evidence from developing countries [Special issue]. Journal of Governance & Regulation, 11(2), 293–300. https://doi.org/10.22495/jgrv11i2siart8