THE CORRELATION BETWEEN FOREIGN DIRECT INVESTMENTS AND EMPLOYMENT

Abstract

Introduction: Foreign direct investment (FDI) is considered as an important source of capital inflows in developing countries such as Turkey. In addition to its various effects, FDI also affects the employment level of the host country in many ways. Purpose: This study examines the effect of foreign direct investment in Turkey on employment. Method: In order to test this relationship, annual data for the years 2013-2021 were used and the stationarity of the variables was checked by applying the ADF test. ARDL approach was applied to find the correlation among the variables. Error correction model (ECM) method was used in the study. This method was used to eliminate the imbalance between the long-term and short-term periods and to test the short and long-run causality between cointegration. Moreover, such methods as cointegration test, unit root test, long-term regression equation were used to make the study more qualified and understandable. Findings: The cointegration was found to exist between FDI and employment. Conclusion: In line with the research findings and analysis results, the importance of government incentives for foreign investors who want to make investments in Turkey emerged. Among the most significant concerns of foreign capital and investors, it has been determined that the concerns about security and financial guarantee are quite high, and this situation arises from political instability. Political and bureaucratic restrictions, sanctions, obstacles and negativities are observed to have significant effects on the activities of foreign investment capital owners in the country. This situation reduces the employment rate and creates a negative and undesired situation. Political stability is considered as the most important effect that ensures the entry of foreign capital into the country, the increase in the number of investors and the increase in the employment rate.