The effect of FDI on unemployment rate in Asian developing economies: The role of digitalization

Abstract

The study uses individuals using the Internet and fixed broadband subscriptions as a proxy for digitalization to empirically examine the effects of FDI inflows, digitalization, and their interaction on unemployment for 32 Asian developing economies from 2002 to 2020. It applies the difference in Generalized Method of Moment and PMG estimation methods. The results show that FDI decreases while digitalization increases unemployment, but their interaction reduces it. Furthermore, economic growth, trade openness, and governance are determinants of unemployment in these countries. The study suggests some implications for governments in developing Asian economies to develop information and digital technology to receive more FDI inflows and create more jobs.