The Effect of foreign direct investment on unemployment in Sub-Saharan Africa
This study aims to measure the effect of foreign direct investment on unemployment in Sub-Saharan African region. The empirical approach makes use of longitudinal/panel data sourced from the World Development Indicators (World Bank) and the United Nations Conference on Trade and Development (UNCTAD) data base for the period 1991-2016.
Unemployment as a percentage of total labor force (of the International Labor Organization estimate) was used as an indicator for unemployment. The study used Pooled Ordinary Least Squares, Fixed Effects and Random effects to determine the effect of foreign direct Investment on unemployment.
The study revealed that foreign direct investment and ratio of female to male in labor force participation have both positive and negative effects on unemployment. Gross fixed capital formation also has a strong effect in reducing unemployment while Gross Domestic product per capita and trade have a strong effects in increasing unemployment in Sub-Saharan Africa. These findings confirm related empirical evidence in many countries.
From a policy viewpoint, the results of this study call for a reform in labor market policy makers to be attentive to the ratios of female to male participation in the labor force, foreign direct investment and trade since these are all crucial in reducing unemployment in Sub-Saharan Africa.
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