Regional Marketization, OFDI, and Sustainable Employment: Empirical Analysis in China

To maintain sustainable development, the government’s macro control is very important, but the system construction of the market itself can’t be ignored. From the perspective of aggregate supply, OFDI (outward foreign direct investment) in developing countries can sustainably promote domestic employment through different kind of channels such as human capital, a reverse spillover of the international technology, and marketization processes. Based on 30 provincial panel data from 2005 to 2017, stating from the C–D production function, this article empirically estimates the total effect and regional differences in the effect of OFDI on domestic employment in China by using the main approach of Sys-GMM. The results show that the promotion effect of OFDI on domestic employment has an obvious lag; the faster the marketization process, the more significant the current period’s substitution effect and the lagged period’s promotion effect of OFDI on domestic employment. This means that it is a lagged-period process for OFDI to enhance total factor productivity and realize the effective allocation of labor resources through various channels. Furthermore, whether the domestic promotion effect of OFDI can be effectively exerted is closely related to the process of domestic marketization. A good market system environment can effectively improve the efficiency of labor resources allocation, thus promoting the sustainable development of domestic employment. China’s market-oriented transformation has not yet been completed. The sustainable growth of China’s employment depends on further promoting a market-oriented economy. Therefore, it is suggested to accelerate the improvement of market mechanisms and related system construction, strengthen the role of the government in public service, and promote the coordinated development of OFDI and IFDI (inward foreign direct investment) in various regions to promote the sustainable development of employment.