Capital outflow and unemployment: evidence from panel data

Abstract

The effect of moving capital abroad on the domestic labour market is ambiguous. We examine the relation between capital outflow and unemployment with the use of panel data techniques. The result shows that in developing countries, the outward direct investment is beneficial to employment and the effect of portfolio investment abroad on domestic employment is negative. However, the association between outward investment and employment is insignificant in industrial countries.

Notes

¹ Those member countries with missing data over the empirical period are excluded from the sample.

² The position of direct investment abroad and portfolio investment assets which are measured in terms of US dollar are both items in international investment position of IFS. Gross domestic product (GDP) measured in terms of local currency is multiplied by the exchange rate to be consistent with the measurement of the numerator.

³ The application of panel data, see Greene (2003).

⁴ GDP measured in terms of local currency is multiplied by the exchange rate so as to be measured consistently in US dollar for every country.