Envisaging the Role of FDI for Unemployment Reduction in Pakistan

Abstract

The era of last century gave birth to the phenomenon of globalization. Access to the markets and transfer of resources enhanced the economic activities worldwide. Various studies depict that foreign direct investment (FDI) inflows induct a vital role in the economic advancement and they pose apparent impacts on the employment generation process. FDI is also a cause of technology transfers for imparting skills to the workers. This study analyses the role of FDI in reducing the unemployment in Pakistan. The study uses vector errors correction model (VECM) on the time series data over the span of 1991-2023. The results observe long-run impacts of FDI along with its shortrun influences on the employment levels in the economy. This impact is of positive nature which ultimately ensures unemployment reduction in the country by giving rise to the FDI inflows. Moreover, these results forecast the regulation of short run shocks at a higher speed of adjustment in the long run. Henceforth the authorities are recommended to commence and implement the FDI magnetizing policies for improving the employment conditions in the country.