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http://dx.doi.org/10.5762/KAIS.2019.20.12.574

Relationship among FDI, Economic Growth, and Employment  

Kang, Gi-Choon (Department of Economics, Jeju National University)
Publication Information
Journal of the Korea Academia-Industrial cooperation Society / v.20, no.12, 2019 , pp. 574-580 More about this Journal
Abstract
In this paper, the economic performance of the Jeju Free International City and the Free Economic Zone is investigated using statistical testing and the difference in differences (DID) model with data on foreign direct investment (FDI), gross regional domestic product (GRDP), and employment-to-population ratio (EPR). The relationships among FDI, GRDP, and EPR are also investigated using the panel vector error-correction model on the regional data. The compound average growth rate of actual investment, and the ratio of FDI received to FDI declared in the capital region were higher than in the non-capital region. For the growth and relative volume of FDI received, seven regions out of 16 were found to be low in growth and small in relative volume. The results of statistical testing showed statistically significant differences in some variables, except for two regions, but DID estimates that determine the pure policy effect of zone designation showed statistical insignificance. On the other hand, the explanatory power among the three variables was found to be quite limited, but it was greater in the cities, provinces, and non-capital region. In summary, it is necessary to establish the FDI inducement mechanism so the inflow of FDI can increase GRDP and EPR.
Keywords
Foreign Direct Investment; Jeju Free International City; Free Economic Zone; Difference-In-Difference Model; Panel Vector Error Correction Model;
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