The Nexus Between Foreign Direct Investment, Informal and Formal Sectors in Sri Lanka

South Asia Economic Journal Pub Date : 2023-03-01 DOI:10.1177/13915614231158729

T. Bhavan

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Abstract

The purpose of this study is to investigate the bilateral relationship among formal, informal and foreign direct investment (FDI) in the case of Sri Lanka during the period from 1990 to 2019. Using annual time series data, the Two Stage Least Square method is employed to investigate the relationship among the endogenous variables. The results derived from the analysis suggest that the integration between formal and informal sectors and formal sector and FDI are positive and have significant impacts on each other. However, the negative and significant impacts of the informal sector and FDI on each other further suggest that the integration between the informal sector and FDI did not give an optimistic signal to the country to contemplate that the informal sector is supporting foreign investors. At the same time, a sign that FDI discourages informal sector progression in the results has triggered the attention of further investigations on whether foreign investment agglomeration in Sri Lanka promotes informal-formal sectoral transformation at the cost of the informal sector. However, this study proposes an interest in sound policy requirements to reshape the informal sector towards the interest of foreign direct investors and informal-formal sector transformation. JEL Codes: E26, F21, J21, J46

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外商直接投资与斯里兰卡正规和非正规部门之间的关系

本研究的目的是调查1990年至2019年期间斯里兰卡正式、非正式和外国直接投资(FDI)之间的双边关系。利用年度时间序列数据，采用两阶段最小二乘法研究内生变量之间的关系。分析结果表明，正规部门与非正规部门、正规部门与外商直接投资之间的整合是正向的，且相互影响显著。然而，非正规部门和外国直接投资相互之间的消极和重大影响进一步表明，非正规部门和外国直接投资之间的一体化并没有给该国一个乐观的信号，使其认为非正规部门正在支持外国投资者。与此同时，结果显示外国直接投资阻碍了非正式部门的发展，这引起了进一步调查的注意，即外国投资在斯里兰卡的聚集是否以牺牲非正式部门为代价促进了非正式-正式部门的转变。然而，本研究提出了对合理的政策要求的兴趣，以重塑非正式部门，使其符合外国直接投资者和非正式-正式部门转型的利益。JEL代码:E26, F21, J21, J46

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来源期刊

South Asia Economic Journal Economics, Econometrics and Finance-Economics, Econometrics and Finance (all)

CiteScore

1.10

自引率

0.00%

发文量

期刊介绍： The South Asian nations have progressively liberalized their economies in recent years in an effort to integrate with the world economy. They have also taken steps to enhance multilateral and regional economic integration. Even though the South Asian economies have grown at an average rate of more than 5 per cent over the last few years, roughly 40 per cent of their people still live below the poverty line. Hence, the South Asian region continues to face many challenges of economic and social development. The South Asia Economic Journal (SAEJ) is designed as a forum for informed debate on these issues, which are of vital importance to the people of the region who comprise one-sixth of the world’s population. The peer-reviewed journal is devoted to economic analysis and policy options aimed at promoting cooperation among the countries comprising South Asia. It also discusses South Asia’s position on global economic issues, its relations with other regional groupings and its response to global developments. We also welcome contributions to inter-disciplinary analysis on South Asia. As a refereed journal, SAEJ carries articles by scholars, economic commentators,policy-makers and officials, from both the private and public sectors. Our aim is to create a vibrant research space to explore the multidimensional economic issues of concern to scholars working on South Asia. Among the issues debated in relation to South Asia are: - the implications of global economic trends; - the issues and challenges by WTO; - approaches to industrialization and development; - the role of regional institutions such as the SAARC; - the relationship between SAARC and other regional economic groupings such as ASEAN; - the implications of economic liberalization for trade and investment in the region; - new initiatives that can be launched to enhance economic cooperation among the South Asian countries both on a bilateral and a regional basis.