Does Foreign Direct Investment Affect Employment in Guinea: Empirical Assessment

Abstract

This study shed light on the extent to which foreign direct investment contribute to employment in Guinea. FDI per GDP net inflows and unemployment rate are adopted as key indicators whereas inflation, trade openness, credit to private sector are control variables.  
 
 The empirical evidence is computed through ARDL method and the subsequent findings are established: first, foreign investment negatively and insignificantly affects unemployment in the short run. This result may be linked to the fact that a huge portion of FDI in Guinea is resource seeking type which itself does not generate enough jobs in the affiliate firms. Moreover, the interactions between such kind of investment and local suppliers are very limited, mitigating its effect on employment in the supplier’s side. Second, the short term coefficients for inflation and credit to private sector are positive and insignificant, contradicting a popular macroeconomic theory known as Phillips curve.   
 
 Overall, government should promote investments that can have transformative effect on domestic economy through linkages and spillovers. Furthermore, special emphasis must be put on human capital (education and healthcare) so that Guinean youth could be more competitive and capable to seize job opportunities offered both by foreign multinationals and local firms.