The Effects of Globalization on Unemployment: a panel data approach for upper middle income countries

In this paper we discuss how globalization can affect on employment in some upper income countries. Accordingly, the impact of 11 macroeconomic indicators on employment, including 6 different indicators of openness and international trade, has been estimated. We employ a panel data approach, applying the data of 24 countries. The study finds that the sizes of government, population and growth of GDP have a positive and significant impact on employment. Whilst FDI as the only indicator of globalization that is statistically significant in our model, has a negative impact on employment. It means foreign direct investment leads to destruct jobs, presumably as a result of bankruptcy or closure of local firms or willingness to recruit skilled workers by newly established corporate. Moreover according to literature review for the upper middle income countries that have relatively smaller skilled labour force, the FDI negatively affect on employment whilst for the high income countries that have relatively larger skilled workers population FDI has no effect on employment