Effects of Foreign Direct Investment (FDI) on Bangladeshi Labor Market

Growth is a primary agendum for all developing countries.
Bangladesh is no exception in this trend. Prior to 1980s, the
country could heavily rely on official foreign aid to address its
resource scarcity, but with the dwindling availability of foreign
aid and increasing global economic integration, the country
now treats Foreign Direct Investment (FDI) as a potential
stimulus for rapid growth. However, investment from abroad is
not quite benign in the sense that it interacts with local
parameters and can sometime create uncomfortable
consequences, like employment loss. Since employment is a
politically sensitive parameter this issue is addressed in the
literature in some details. The focus of this paper is to
investigate to what extent FDI creates an impact in the
Bangladeshi labor market. Using annual data from 1991 to
2013 results show that there exits significantly positive
relationship between unemployment rate and net inflows of
FDI expressed as a percentage of GDP. This indicates that as
the share of FDI to GDP increases it leads to a rise in the
number of people unemployed which to some extent is
uncomfortable though not unusual in literature.

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