Job creation identification problem

Document Type:Case Study

Subject Area:Economics

Document 1

While positive impacts on increasing employment opportunities are clear in public, there exist the problems that arise due to the disemployment in the domestic informal sectors of the market as a result of the investments. These problems remain uncertain because of the lack of a proper mechanism for identifying and assessing the potential job creation as a result of the investments. Second, the analysis utilizes the FDI theory of the general equilibrium model to help support the case study on how FDI use the skills present in the country to help create jobs. The model also argues that the differences in the location and resources in a country are critical and can create a mismatch in skills causing unemployment for a particular portion of the host country.

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After that, the paper looks at the overall short term and long-term problems such as the use of aggregate data that lack information on spillover impact, policies in place and the cherry-picking phenomenon, which ultimately presents a challenge in assessing the overall employment opportunities offered. The primary objective of this case study is to highlight how these investments, although touted to bring in a positive impact in the labor market, have also been found to bring in detrimental effects as relates to job creation. The issue that the case study addresses is the problem in determining the actual impact of the investments because there lacks a universal standard for assessing the direct, indirect and induced job creation that results from foreign investments.

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In research, discussions on FDI in the labor market often focuses on the types of jobs and skills available in different countries. The total number of people that manage to get employed from these employment opportunities affect the flow of FDI into the country (Kiyota, 2014). However, assessing and comparing the impact of employment in these industries has become complicated. The foreign countries have moved their low skilled tasks into the host country. The theory, therefore, helps explain how jobs are created within the mining industry in the host country. However, this model also shows wage inequality can become created as a negative consequence as the movement of low skilled labor into the country in trade for high skill labor can affect the wages of the local industries, which ultimately leads poor job creation in the country (Zhu, 2005, p.

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To the case study, when investments are made in the mining and agricultural industry within a host country, there is likely to be a positive impact in the increase of job opportunities for the local economy. However, in trade, it creates labor shift demands in both countries as it helps in displacing high skilled local labor, which is not matched with the industry, which has a larger impact on net employment within the country. This means that it can generate unemployment and friction between the foreign investors and the locals over both resources and job opportunities. Research has shown that this problem can get analyzed through the investments of the multinationals that export jobs, which can lead to misemployment due to foreign investors (Becker & Muendler, 2008, p.

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It argues that in a country of operation that requires specific skills, jobs may get exported to foreigners because of the lack of skills that exist within the local community. Challenges in identifying short-term and long-term impact of FDI on employment In the short term, one problem that exists is the focus on the job at the aggregate level that is measuring the effects on the target firms without measuring the spillover effects (Galina & Xu, 2016, p. The information collected focuses on only the direct job created shows FDI as increasing the productivity and age dispersion, which in turn ignores the loss of employment that may have resulted from the spillover that cannot be offset by the jobs created (Galina & Xu, 2016, p.

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The examination of these industries helps the policies move away from using the aggregate level, which provides more in-depth knowledge into the actual impact that FDI has on employment and spillover. Bibliography Adeyemi, Babasanya. Foreign Direct Investment and Employment Generation in Nigeria. Journal of Economics and Sustainable Development. https://www. http://citeseerx. ist. psu. edu/viewdoc/download?doi=10. 5108&rep=rep1&type=pdf Gupta , Manash. pdf Harris, Richard. Spillover and Backward Linkage Effects of FDI: Empirical Evidence for the UK. Spatial Economics Research Centre. Retrieved from: http://eprints. lse. http://www. scielo. org. za/pdf/acom/v18n1/09. pdf Mishat, Mohammad. ijmae. com/files/accepted/52_final. pdf Xu, B. The Relationship between Outsourcing and Wage Inequality under Sector-Specific FDI Barriers. Working Paper.

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