Spillover effects of FDI on employment levels of the service sector in Iran

Abstract

In this study one of the most important effects on the economic globalisation process which is the inflow of foreign direct investment is analysed on the employment position of the sub-sector of the service sector in Iran. For this purpose the impact of the gap between labor productivity in service sector of Iran and developed countries on the ratio of the skilled over unskilled labor while the multinational corporation are entering to the economy are studied by using a panel data during the period of 1997-2004. The findings indicate that when the multinational corporations are entering to the economy the active companies in various field of service sector can employ skilled labor which lead to greater labor productivity and in turn the domestic companies can compete better with the foreign companies (spillover effect). Of course, the rental-properties and other business activities are in first rank in employing the skilled labor and improving the ratio of skilled over unskilled labor.