Foreign direct investment in developing countries: Are there gendered effects?

Foreign direct investment (FDI) has generally been shown to influence a country’s gross domestic product growth and development. Not only, does FDI serve to fill a finance gap by allowing countries to access this important external source of funding but FDI is considered a key channel through which a developing economy could tap into advanced technology and enhance skill development for its labor force. Similarly, many studies have documented the important role of women and gender equality in the process of development. However, research on the impact of FDI on women’s participation in labor markets at the macroeconomic level is very limited. This is even more so when it comes to the effects of FDI on women’s participation (relative to men’s participation) in wage employment in particular.

To fill this gap, I examine the effects of inward FDI on women’s share in the non-agricultural wage employment while controlling for several other determinants of women’s participation in paid labor, such as fertility, education, democracy, etc. I also control for trade and its interplay with FDI. I use panel data from 95 developing countries from Africa, Asia and Latin America, covering the period 1990-2015 and perform Arellano-Bond GMM estimations as well fixed-effects estimations. The preliminary empirical results suggest that the effect of FDI on women’s participation in wage employment is nonlinear, depends on the extent of international trade in the country, and differs across regions. The results suggest that effect of FDI is the strongest in Latin America and Asia and is the weakest in North Africa and the Middle-East (MENA) region.