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Inward FDI and Manufacturing Sector Productivity: An Empirical Evidence from the Dynamic ARDL Approach.

Year 2021, Volume: 13 Issue: 4, 97 - 104, 20.12.2021

Udi Joshua , Josephine Japhet Wubon Seth Nyawebowe Arastus Ayobami Temitope Owolabi

https://doi.org/10.52791/aksarayiibd.904507

Abstract

The real sector for which the manufacturing sector is a part play key role in the quest for achieving economic growth of any country. A high output in the manufacturing sector will connote a high level of GDP all things been equal. However, the productivity of the manufacturing sector is directly dependent on the capital-labour ratio. Thus, this study seeks to examine the impact of foreign capital (FDI) and domestic labour force (population) on the manufacturing sector output in Nigeria. The choice of ARDL approach by this study is informed by the mixed order of integration from the unit root test. The finding indicates that FDI inflow significantly and positively determine the manufacturing output in Nigeria, while labour influence the manufacturing in a positive but insignificant way. Further result prove that the impact of labour force is elastic, indication that little change in the labour force will cause drastically change in the level of output in the manufacturing output. In general, the manufacturing sector is capital-driven rather labour-driven. A recommendation is made of the need for the improvement in education and training to increase the efficiency of labour. Secondly, since FDI capital demonstrate significant positive impact, the authority concern should device policy that will woo more it into the sector for higher productivity. Such policy include, tax holidays, stable exchange rate and lower interest rate to enable smooth flow of investment.

Keywords

Inward FDI Manufacturing Productivity economic growth

References

  • Adejumo, A. V. (2013). Foreign direct investments and manufacturing sector performance in Nigeria,(1970-2009). Australian Journal of Business and Management Research, 3(4), 39.
  • Afamefuna Angus, E. Z. E., Nnaji, M., & Nkalu, N. C. (2019). Impact of Foreign Direct Investment on Manufacturing Sector Output Growth in Nigeria. International Journal of Applied Economics, Finance and Accounting, 5(2), 55-64.
  • AGU, O. C., & OKOLI, T. T. (2015). Foreign direct investment flow and manufacturing sector performance in Nigeria.
  • Anowor, O. F., Ukweni, N. O., Ibiam, F. O., & Ezekwem, O. S. (2013). Foreign direct investment and manufacturing sector growth in Nigeria. International Journal of Advanced Scientific and Technical Research, 5(3), 231-254.
  • Azeroual, M. (2016). The impact of foreign direct investment on the productivity growth in the Moroccan manufacturing sector: Is source of FDI important. Journal of International and Global Economic Studies, 9(1), 29-45.
  • Bakar, N. A. A. (2019). FDI and manufacturing growth: Bound test and ARDL approach. International Journal of Research in Social Sciences, 9(5), 36-91.
  • Banga, R. (2006). The export-diversifying impact of Japanese and US foreign direct investments in the Indian manufacturing sector. Journal of International Business Studies, 37(4), 558-568.
  • Bardesi, H. J. (2016). The Impact Of Fdi On Growth Of Saudi Economy: An Empirical Evaluation Of Manufacturing Sector. Eurasian Journal of Economics and Finance, 4(3), 1-13.
  • Birsan, M., Moraru, C., Cramarenco, R., & Andrei, S. (2005). Contribution of FDI to the Privatisation in the Manufacturing Sector in Romania. Success and Failure Stories. chemical industry, 8, 6.
  • Corvers, F. (1997). The impact of human capital on labour productivity in manufacturing sectors of the European Union. Applied Economics, 29(8), 975-987.
  • Fauzel, S., Seetanah, B., & Sannasee, R. V. (2015). Productivity spillovers of FDI in the manufacturing sector of Mauritius. evidence from a dynamic framework. The Journal of Developing Areas, 295-316.
  • Hernández-Coss, R., & Bun, C. E. (2007). The UK-Nigeria remittance corridor: challenges of embracing formal transfer systems in a dual financial environment.
  • Idoko, C. U., & Taiga, U. U. (2018). Effect Of Foreign Direct Investment (FDI) On Manufacturing Output In Nigeria (1981–2016). Advances in Social Sciences Research Journal, 5(5).
  • Jordaan, J. A. (2008). Intra-and inter-industry externalities from foreign direct investment in the Mexican manufacturing sector: New evidence from Mexican regions. World Development, 36(12), 2838-2854.
  • Lean, H. H. (2008). The impact of foreign direct investment on the growth of the manufacturing sector in Malaysia. International Applied Economics and Management Letters, 1(1), 41-45.
  • Li, X., Liu, X., & Parker, D. (2001). Foreign direct investment and productivity spillovers in the Chinese manufacturing sector. Economic systems, 25(4), 305-321.
  • Masron, T. A., Zulkafli, A. H., & Ibrahim, H. (2012). Spillover effects of FDI within manufacturing sector in Malaysia. Procedia-social and behavioral sciences, 58, 1204-1211.
  • Nikoloski, D. (2017). The impact of Foreign Direct Investments on employment: the case of the Macedonian manufacturing sector. Eastern Journal of European Studies, 8(2), 147-165.
  • Nkoro, E., & Uko, A. K. (2016). Autoregressive Distributed Lag (ARDL) cointegration technique: application and interpretation. Journal of Statistical and Econometric methods, 5(4), 63-91.
  • Orji, A., Anthony-Orji, O. I., Nchege, J. E., & Okafor, J. (2015). Manufacturing output and foreign direct investment in Nigeria: A new evidence. International Journal of Academic Research in Economics and Management Sciences, 4(3), 16-28.
  • Qiu, B., Yang, S., Xin, P., & Kirkulak, B. (2009). FDI technology spillover and the productivity growth of China’s manufacturing sector. Frontiers of Economics in China, 4(2), 209-227.
  • Tartiyus, E. H., Dauda, T. M., & Peter, A. (2015). Impact of population growth on economic growth in Nigeria. IOSR Journal of Humanities and Social Science (IOSRJHSS), 20(4), 115-123.
  • ul Haq, A. (2012). Determinants of capital structure: A case from textile industry of Pakistan. International Journal of Academic Research in Business and Social Sciences, 2(4), 408.
  • Vu, H. D. (2016). Technical efficiency of FDI firms in the Vietnamese manufacturing sector. Review of Economic Perspectives, 16(3), 205-230.
  • Wang, M. (2009). Manufacturing FDI and economic growth: evidence from Asian economies. Applied Economics, 41(8), 991-1002.

Inward FDI and Manufacturing Sector Productivity: An Empirical Evidence from the Dynamic ARDL Approach.

Year 2021, Volume: 13 Issue: 4, 97 - 104, 20.12.2021

Udi Joshua , Josephine Japhet Wubon Seth Nyawebowe Arastus Ayobami Temitope Owolabi

https://doi.org/10.52791/aksarayiibd.904507

Abstract

The real sector for which the manufacturing sector is a part play key role in the quest for achieving economic growth of any country. A high output in the manufacturing sector will connote a high level of GDP all things been equal. However, the productivity of the manufacturing sector is directly dependent on the capital-labour ratio. Thus, this study seeks to examine the impact of foreign capital (FDI) and domestic labour force (population) on the manufacturing sector output in Nigeria. The choice of ARDL approach by this study is informed by the mixed order of integration from the unit root test. The finding indicates that FDI inflow significantly and positively determine the manufacturing output in Nigeria, while labour influence the manufacturing in a positive but insignificant way. Further result prove that the impact of labour force is elastic, indication that little change in the labour force will cause drastically change in the level of output in the manufacturing output. In general, the manufacturing sector is capital-driven rather labour-driven. A recommendation is made of the need for the improvement in education and training to increase the efficiency of labour. Secondly, since FDI capital demonstrate significant positive impact, the authority concern should device policy that will woo more it into the sector for higher productivity. Such policy include, tax holidays, stable exchange rate and lower interest rate to enable smooth flow of investment.

Keywords

Inward FDI Manufacturing Productivity Economic Growth

References

  • Adejumo, A. V. (2013). Foreign direct investments and manufacturing sector performance in Nigeria,(1970-2009). Australian Journal of Business and Management Research, 3(4), 39.
  • Afamefuna Angus, E. Z. E., Nnaji, M., & Nkalu, N. C. (2019). Impact of Foreign Direct Investment on Manufacturing Sector Output Growth in Nigeria. International Journal of Applied Economics, Finance and Accounting, 5(2), 55-64.
  • AGU, O. C., & OKOLI, T. T. (2015). Foreign direct investment flow and manufacturing sector performance in Nigeria.
  • Anowor, O. F., Ukweni, N. O., Ibiam, F. O., & Ezekwem, O. S. (2013). Foreign direct investment and manufacturing sector growth in Nigeria. International Journal of Advanced Scientific and Technical Research, 5(3), 231-254.
  • Azeroual, M. (2016). The impact of foreign direct investment on the productivity growth in the Moroccan manufacturing sector: Is source of FDI important. Journal of International and Global Economic Studies, 9(1), 29-45.
  • Bakar, N. A. A. (2019). FDI and manufacturing growth: Bound test and ARDL approach. International Journal of Research in Social Sciences, 9(5), 36-91.
  • Banga, R. (2006). The export-diversifying impact of Japanese and US foreign direct investments in the Indian manufacturing sector. Journal of International Business Studies, 37(4), 558-568.
  • Bardesi, H. J. (2016). The Impact Of Fdi On Growth Of Saudi Economy: An Empirical Evaluation Of Manufacturing Sector. Eurasian Journal of Economics and Finance, 4(3), 1-13.
  • Birsan, M., Moraru, C., Cramarenco, R., & Andrei, S. (2005). Contribution of FDI to the Privatisation in the Manufacturing Sector in Romania. Success and Failure Stories. chemical industry, 8, 6.
  • Corvers, F. (1997). The impact of human capital on labour productivity in manufacturing sectors of the European Union. Applied Economics, 29(8), 975-987.
  • Fauzel, S., Seetanah, B., & Sannasee, R. V. (2015). Productivity spillovers of FDI in the manufacturing sector of Mauritius. evidence from a dynamic framework. The Journal of Developing Areas, 295-316.
  • Hernández-Coss, R., & Bun, C. E. (2007). The UK-Nigeria remittance corridor: challenges of embracing formal transfer systems in a dual financial environment.
  • Idoko, C. U., & Taiga, U. U. (2018). Effect Of Foreign Direct Investment (FDI) On Manufacturing Output In Nigeria (1981–2016). Advances in Social Sciences Research Journal, 5(5).
  • Jordaan, J. A. (2008). Intra-and inter-industry externalities from foreign direct investment in the Mexican manufacturing sector: New evidence from Mexican regions. World Development, 36(12), 2838-2854.
  • Lean, H. H. (2008). The impact of foreign direct investment on the growth of the manufacturing sector in Malaysia. International Applied Economics and Management Letters, 1(1), 41-45.
  • Li, X., Liu, X., & Parker, D. (2001). Foreign direct investment and productivity spillovers in the Chinese manufacturing sector. Economic systems, 25(4), 305-321.
  • Masron, T. A., Zulkafli, A. H., & Ibrahim, H. (2012). Spillover effects of FDI within manufacturing sector in Malaysia. Procedia-social and behavioral sciences, 58, 1204-1211.
  • Nikoloski, D. (2017). The impact of Foreign Direct Investments on employment: the case of the Macedonian manufacturing sector. Eastern Journal of European Studies, 8(2), 147-165.
  • Nkoro, E., & Uko, A. K. (2016). Autoregressive Distributed Lag (ARDL) cointegration technique: application and interpretation. Journal of Statistical and Econometric methods, 5(4), 63-91.
  • Orji, A., Anthony-Orji, O. I., Nchege, J. E., & Okafor, J. (2015). Manufacturing output and foreign direct investment in Nigeria: A new evidence. International Journal of Academic Research in Economics and Management Sciences, 4(3), 16-28.
  • Qiu, B., Yang, S., Xin, P., & Kirkulak, B. (2009). FDI technology spillover and the productivity growth of China’s manufacturing sector. Frontiers of Economics in China, 4(2), 209-227.
  • Tartiyus, E. H., Dauda, T. M., & Peter, A. (2015). Impact of population growth on economic growth in Nigeria. IOSR Journal of Humanities and Social Science (IOSRJHSS), 20(4), 115-123.
  • ul Haq, A. (2012). Determinants of capital structure: A case from textile industry of Pakistan. International Journal of Academic Research in Business and Social Sciences, 2(4), 408.
  • Vu, H. D. (2016). Technical efficiency of FDI firms in the Vietnamese manufacturing sector. Review of Economic Perspectives, 16(3), 205-230.
  • Wang, M. (2009). Manufacturing FDI and economic growth: evidence from Asian economies. Applied Economics, 41(8), 991-1002.
There are 25 citations in total.

Details

Primary Language English
Journal Section Research Article
Authors

Udi Joshua 0000-0002-7862-0547

Josephine Japhet Wubon 0000-0003-0313-5245

Seth Nyawebowe Arastus 0000-0002-4260-617X

Ayobami Temitope Owolabi 0000-0002-5376-1204

Publication Date December 20, 2021
Published in Issue Year 2021Volume: 13 Issue: 4

Cite

APA Joshua, U., Wubon, J. J., Arastus, S. N., Owolabi, A. T. (2021). Inward FDI and Manufacturing Sector Productivity: An Empirical Evidence from the Dynamic ARDL Approach. Aksaray Üniversitesi İktisadi Ve İdari Bilimler Fakültesi Dergisi, 13(4), 97-104. https://doi.org/10.52791/aksarayiibd.904507
AMA Joshua U, Wubon JJ, Arastus SN, Owolabi AT. Inward FDI and Manufacturing Sector Productivity: An Empirical Evidence from the Dynamic ARDL Approach. Journal of ASU FEAS. December 2021;13(4):97-104. doi:10.52791/aksarayiibd.904507
Chicago Joshua, Udi, Josephine Japhet Wubon, Seth Nyawebowe Arastus, and Ayobami Temitope Owolabi. “Inward FDI and Manufacturing Sector Productivity: An Empirical Evidence from the Dynamic ARDL Approach”. Aksaray Üniversitesi İktisadi Ve İdari Bilimler Fakültesi Dergisi 13, no. 4 (December 2021): 97-104. https://doi.org/10.52791/aksarayiibd.904507.
EndNote Joshua U, Wubon JJ, Arastus SN, Owolabi AT (December 1, 2021) Inward FDI and Manufacturing Sector Productivity: An Empirical Evidence from the Dynamic ARDL Approach. Aksaray Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi 13 4 97–104.
IEEE U. Joshua, J. J. Wubon, S. N. Arastus, and A. T. Owolabi, “Inward FDI and Manufacturing Sector Productivity: An Empirical Evidence from the Dynamic ARDL Approach”., Journal of ASU FEAS, vol. 13, no. 4, pp. 97–104, 2021, doi: 10.52791/aksarayiibd.904507.
ISNAD Joshua, Udi et al. “Inward FDI and Manufacturing Sector Productivity: An Empirical Evidence from the Dynamic ARDL Approach”. Aksaray Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi 13/4 (December 2021), 97-104. https://doi.org/10.52791/aksarayiibd.904507.
JAMA Joshua U, Wubon JJ, Arastus SN, Owolabi AT. Inward FDI and Manufacturing Sector Productivity: An Empirical Evidence from the Dynamic ARDL Approach. Journal of ASU FEAS. 2021;13:97–104.
MLA Joshua, Udi et al. “Inward FDI and Manufacturing Sector Productivity: An Empirical Evidence from the Dynamic ARDL Approach”. Aksaray Üniversitesi İktisadi Ve İdari Bilimler Fakültesi Dergisi, vol. 13, no. 4, 2021, pp. 97-104, doi:10.52791/aksarayiibd.904507.
Vancouver Joshua U, Wubon JJ, Arastus SN, Owolabi AT. Inward FDI and Manufacturing Sector Productivity: An Empirical Evidence from the Dynamic ARDL Approach. Journal of ASU FEAS. 2021;13(4):97-104.
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