OFDI, international trade and domestic employment: evidence from China

Abstract

International division of labor is not only an effective way to improve efficiency, but also the root of excess factors. Based on Myint-Smith theory, this paper analyses the impact of OFDI and international trade on domestic employment. On the one hand, it can directly promote domestic employment growth by expanding output scale; on the other hand, it can promote domestic consumption growth and upgrading by improving production efficiency and promoting industrial upgrading, and indirectly promote employment growth. Empirical test chooses China's provincial panel data test theory from 2008 to 2017. Static analysis shows that the repeated test results of core variables such as inter-provincial OFDI flow, OFDI stock, import, export, import and export show a significant positive effect on inter-provincial employment growth. Dynamic analysis shows that the coefficients of core variables are positive promotion effects. The robustness test is based on the differences between urban and rural areas, industries and regions. Towns have significant promotion effect while villages have significant substitution effect. Real estate, construction and information technology industries have the strongest promotion effect, and show a significant promotion effect of the weakening trend of East, West and China. The positive effect of China's OFDI and international trade on employment not only criticizes the fallacy that "OFDI and import cannot promote employment", but also perfects VFS theory.