Mohamad Yunus, Norhanishah and Said, Rusmawati and Saini, W. N. W. Azman
(2015)
Spillover Effects Of Fdi And Trade On Demand
For Skilled Labour In Malaysian
Manufacturing Industries.
Asian Academy of Management Journal (AAMJ), 20 (2).
pp. 1-27.
ISSN 1394-2603
Abstract
Malaysia has been among the top recipients of foreign direct investment (FDI) in
the world. However, the benefit of FDI spillovers on skill upgrading in Malaysia
remains ambiguous. This is particularly important to countries such as Malaysia, as the
volume of FDI inflows has continued to increase over time. The present study adds to the
literature investigating the effects of FDI as a spillover channel through which foreign
trade enhances the relative demand for skilled labour in 50 Malaysian manufacturing
industries during the 2000–2008 period. Our empirical results based on the generalised
method-of-moments system estimator reveal that the spillover effects of FDI are
significant for skill upgrading and, in turn, lead to increased demand for skilled labour.
Although the coefficient for FDI indicates a negative relationship between FDI and
skilled labour demand, the effect of FDI is positive and statistically significant. This
result gives an indication that the spillover effects of FDI appear to be quickly
assimilated by workers in the Malaysian manufacturing industries through the "learning
effect" and that the fast pace is biased towards skilled workers. Nevertheless, this study
finds no evidence of spillover effects from trade on the demand for skilled labour. The
findings from this study potentially contribute to long-run FDI policy, especially to
encourage FDI inflows into low receiving industries.
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