Foreign Firms and Chinese Employment

Reprint No. 2009:5

Author(s): Sune Karlsson, Nannan Lundin, Fredrik Sjöholm and Ping HeYear: 2009 Title: The World Enonomy Volume (No.): 32 (1) Pages: 178–201
Online article (restrictions may apply)

This paper examines the effect of foreign direct investment (FDI) on employment in the Chinese manufacturing sector. As one of the world's largest recipients of FDI, China has arguably benefited from foreign multinational enterprises in various respects. However, one of the main challenges for China, and other developing countries, is job creation, and the effect of FDI on employment is uncertain. The effect depends on the amount of jobs created within foreign firms as well as the effect of FDI on employment in domestic firms. We analyse FDI and employment in China using a large sample of manufacturing firms for the period 1998–2004. Our results show that FDI has positive effects on employment growth. The relatively high employment growth in foreign firms is associated with their firm characteristics and their high survival rate. Employment growth is also relatively high in private domestic Chinese firms. There also seems to be a positive indirect effect of FDI on employment in private domestically-owned firms, presumably caused by spillovers.

Karlsson, Sune, Nannan Lundin, Fredrik Sjöholm and Ping He (2009), "Foreign Firms and Chinese Employment". The World Enonomy 32(1), 178–201.

Fredrik Sjöholm


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