Empirical Investigation on Effects of FDI on Unemployment in SADC Countries

RUNNING HEAD: Unemployment in SADC Countries
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An empirical investigation on the effects of FDI on Job creation/unemployment in
SADC countries.
Okheli Munotyiwa
[Pick the date]

Unemployment in SADC Countries 1
DECLARATION

Unemployment in SADC Countries 2
ACKNOWLEDGMENTS

Unemployment in SADC Countries 3
Executive Summary
The dissertation is based on the examination of the causal relationship between FDI
and employment in SADC countries. The objective of this study is to examine the
causal relationship between employment and other variables in the SADC regions
for the period of 2008-2018. The investigation is done in the panel data context and
focuses on checking the causal relationship between the variables such as inflation,
government expenditures, FDI, and economic growth with employment. The study
focuses on the panel of 15 countries in SADC bloc and for that panel data analysis
method is used to examine the dependency of one variable on other variables. The
main aim of the study is to check the null hypotheses that are; there is no
relationship between FDI and unemployment, inflation negatively impact on the
unemployment level and population size does not impact unemployment variables.
The study based on these hypotheses and all the tests is performed to check
whether these null hypotheses are rejected or accepted. In this study panel data is
used and for that justification is given, for the examination of relationship three
approaches are used that are panel integration, granger causality and panel unit root
to know the causation between two variables. Furthermore, empirical results are
disclosed in a table form that includes variables and methods used by the different
researchers and the outcome attained from there researches. The study also
investigates deeply the other independent variables and their impact on dependent
variables that is employment. Major concern is given on FDI as an independent
variable and how this affects the employment in SADC regions. At last, the study
reveals the outcome with proper analysis of data using different qualitative and
quantitative techniques of analysis. Furthermore, research ends with the conclusion
that is based on the findings of the study and that includes that null hypothesis that is
formulated that FDI has impact on employment in SADC regions is rejected and on
that basis recommendations are given to increase the inflow of FDI in the SADC
regions to ensure the growth of these economies. As from the study, it is known that
economic growth has a greater impact on the employment so initiatives taken by
policymakers to increase FDI will boost the economy and that will bring more
employment.

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Table of Contents
Chapter1. Introduction..................................................................................................7
1. Background to the study....................................................................................7
1.1 Objectives of the study.................................................................................8
1.2 Hypotheses of the study..............................................................................8
1.3 Study motivation and Significance...............................................................9
1.4 Structure of Study........................................................................................9
2. SADC FDI and Economic Growth...................................................................10
2.1 SADC Review............................................................................................10
2.2Economic growth dynamics and FDI in SADC...........................................11
Chapter 2: Literature Review......................................................................................15
1. Introduction......................................................................................................15
1.1 Foreign direct investment..........................................................................15
1.2 Theoretical framework...............................................................................17
1.3 Dependency theory;...................................................................................20
1.4Endogenous growth models theory............................................................20
2. FDI Effects on Employment................................................................................22
2.1 African countries specific focused research..............................................22
2.2 General Non-African Focus.......................................................................26
2.3 Summary of the empirical research...........................................................31
Chapter 3 Research Methodologies...........................................................................35
1. Overview of Methodology................................................................................35
1.1 Research Design.......................................................................................35
1.2 Research Methodology..............................................................................35
2. Model and Data...............................................................................................35
2.1 Justification for opting panel data..............................................................36

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3. Strategy for research.......................................................................................37
3.1 Empirical strategy /Model..........................................................................37
4. Hypothesis.......................................................................................................40
Chapter 4 Data and Analysis......................................................................................41
1 Empirical Results..................................................................................................41
1.1 Data Limitations and Exceptions...............................................................44
1.2 Findings.....................................................................................................46
Chapter 5: Conclusion and Recommendations..........................................................49
1. Introduction......................................................................................................49
1.1 Summary....................................................................................................49
2. Recommendations...........................................................................................51
References.................................................................................................................53
Appendices.................................................................................................................61
Appendix 1: Employment to Population Ratio (SADC countries)..........................61
Appendix 2: Foreign Direct Investment for period of 2007-2017............................61
Appendix 3: Foreign Direct Investment for period of 2018.....................................62
Appendix 4: Foreign Direct Investment Inflows and Outflows................................62
Appendix 5: GDP at Market Prices (US$ Million)....................................................63
Appendix 6: FDI by Member States (US$ Million)..................................................63

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List of Figures and Tables
Table 1: African Regional Blocs comparison with SADC 2017......................14
Table 2: Summary of the Empirical Research ...........................................35
Table 3: Statistics of independent variables used in study..........................42
Table 4: Correlation Matrixes of the Variables...........................................43
Table 5: SADC Countries Panel Data Model.............................................45
Table 6: Regression Analysis .................................................................48
Table 7: Analysis of independent variables ..............................................49
Figure 1: SADC GDP by country share (2017)...........................................15