Revisiting the Nexus of FDI and Employment in International Trade: Evidence from the Emerging Construction Service Sector


1 Faculty of Economics, State University of Jakarta, Jakarta, Indonesia

2 Faculty of Economics, Universitas Brawijaya, East Java, Indonesia

3 Ministry of Trade Republic of Indonesia


This study examines the relationship between Foreign Direct Investment (FDI) and employment in the Indonesia construction service sector. The method used in this study is Panel VECM Granger. The data used are the data of FDI inflow and employment in the construction sector in some provinces, namely North Sumatra, Riau, Jakarta, West Java, East Java and Bali from 2000 to 2014. The share of the six provinces is 80% of the total of national FDI in the construction sector. The results showed that there is unidirectional causality in short-term and long-term between FDI and labor. That relationship is the inflow of FDI strongly influenced by employment. In other words, that the Indonesian human resources able to encourage investors to invest in Indonesia and not vice versa.