FDI and Employment by Industry in China

Aiming at exploring the specific relationship between FDI and employment of three strata industries in the particular literature of china, EG co-integration method and Granger causality test is applied to identify the long-run relations and short-run linkages between FDI and employment in each of the industry via distributed lag model; for further investigation of short-run disequilibrium, first-order and second-order ECMs are created to assess the short-term deviation. Findings indicate that for secondary and tertiary industry, growth of FDI in the long run would promote employment, particularly for the tertiary industry; in the short term FDI has limited and even negative impetus on employment, but the latter indirectly increases the former, which has significant implications for policy prescription.