Foreign Direct Investment and Employment Growth in the States of Mexico: Competitiveness and Social Progress

Abstract

Employment growth is a desirable outcome of Foreign Direct Investment (FDI) and the economic performance of regions. However, the evidence available for Mexico is inconclusive. This study aims to contribute to the literature by assessing the dynamic relation between FDI and employment in the states of Mexico, and investigating the conditioning role of social progress, local public investment and competitiveness. We employ Impulse Response Functions and variance decomposition, derived from a Panel Vector Autoregressive (PVAR) model. The results provide evidence on the nexus between employment growth and the different types of FDI. We confirm the dynamic interrelation is, at best, weak.