Foreign direct investments nexus unemployment in East African IGAD member countries a panel data approach

Abstract

This study aims to examine between foreign direct investments nexus unemployment in the Intergovernmental Authority for Development member countries from East Africa. The study employed panel data approach for member countries from the year of 1996–2021. It concluded that annual unemployment rate, annual population growth rate, and economic growth of the host countries have significant impacts on foreign direct investments. Since the purpose of this study was to examine the relations ship between foreign direct investment and unemployment, and the findings of the study determined that foreign direct investment has a significant negative impact on unemployment. Additionally, the impact of these host countries was confirmed to be the same as cross-sectional entities of member countries. According to the study, the public sector should create a climate that attracts foreign direct investments there by absorbing unemployed groups and driving employment rates upward.

Keywords:

• foreign direct investments
• nexus
• unemployment
• random effect and IGAD

PUBLIC INTEREST STATEMENTS

Today, the economies of the world are becoming increasingly interdependent. Foreign direct investments and unemployment is crucial elements of the growth promotion policy of least-developed countries, particularly in East Africa. The study provides a rigorous analysis of how the foreign direct investments are affecting the unemployment rate and economic growth in IGAD member countries. Three key findings emerged from this study. Empirical evidence suggests that foreign direct investments lead to a reduction in unemployment. The second factor that contributes to economic growth in these countries is the inflow of foreign direct investments, which boost economic growth through the transfer of technologies and increased employment opportunities. Lastly, the findings of this study suggest that the population growth rate of countries has a significant negative impact on foreign direct investments and cross sectional entities along foreign direct investments and unemployment.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

The authors received no direct funding for this research.

Notes on contributors

Wondimhunegn Atilaw Woldetensaye

The authors of this article are Wondimhunegn Atilaw Woldetensaye lecturer of Mizan Tepi University, department of economics, Ethiopia. I earned my BA in Economics and MSc in Economics Policy Analysis from Dire Dawa and Jimma University, respectively. I have been conducting and involving work on the design of economics research developments, fundamental model and Analytical studies. My research interests include macroeconomics and budget deficits, international trade, merchandise export, financial economics, income inequality, and cross-country economic growth. Endashaw Sisay holds MSc from Jimma University. Now he is lecturer at Mizan Tepi University, department of economics. His research interests include financial economics, econometrics and industrial economics. Agumas Shiferaw got his MSc in marketing management from Hawassa University. Now he is a lecturer in Mizan Tepi University departments of marketing managements. His research focuses on consumer behavior, profitability of companies and market chain value.