The Effect of Foreign Direct Investment on Employment in Tourism Industry: A Case Study of Selected Countries

Document Type: Case Study


1 Associate Professor, Department of Economics, University of Mazandaran, Babolsar, Iran

2 Full Professor, Department of Economics, University of Mazandaran, Babolsar, Iran

3 MA Student, Department of Economics, University of Mazandaran, Babolsar, Iran


The purpose of the present research is to study the effect of foreign direct investment on employment in tourism. In this regard, the effect of foreign direct investment as well as gross domestic production (GDP), tax rate, and globalization index as explanatory variables are studied on tourism employment as dependent variable using panel data econometrics through statistical data of 48 selected countries including Iran within 2009-2013. The results indicate that foreign direct investment negatively influences employment in tourism among the selected countries. Regarding tourism as a user sector and since foreign direct investment is associated with technology transfer and as many labor services may not be substituted by technology, attracting foreign investment is less than other sectors. Therefore, the professions are created by foreign investment in more attracting industries. Thus, it concluded that foreign direct investment attracts tourism sector workforce and reduces employment through creating professions in other economic sectors. It can be stated that this significant effect is maintained. Moreover, the effect of GDP and tax rate is positive; whereas, the globalization index variable is negative, which is consistent with the experimental results of previous studies. 


Bakhtiyari, S., and Yazdani, M. (2010). Studying direct and indirect effect of tourism on employment. Economics quarterly, fifth year, No. 13.Pp. 49-60
Behboudi, D., and Bastan, F. (2010). The relationship between tourism and foreign direct investment in the developing countries (Causality approach in panel data). Economics quarterly, fourth year, No. 11. Pp. 1-18
Dunnig, J. (1997). The European International Market  Programme  and Inbound FDI. Journal of Common Market Studies,  NO 35, P 1-30.
Haley, U. C. V., & Haley, G. T. (1997). When the Tourist Flew in: Strategic Implications of Foreign Direct Investment in Vietnam’s Tourism Industry.  Management Decision, NO 35/8, P 595-604. 
Hardin, A., & Holmes, L. (1997). Service Trade and Foreign Direct Investment. Staff Research Paper, Australian Government Productivity Commission, Industry Commission.
Jude, C., & Silaghi, M.I.P. (2015). Employment  Effect  of  Foreign  Direct Investment: New Evidence From Central and Eastren European Countries. International Economia, No 10, P14.
Lipsey, R. (2003). Home  and  Host  Country  Effects  of  FDI. NBER Working Paper, NO13, P 92-93.
Mahdavi, A., and Aziz mohammadlou, H. (2004). Foreign direct investment and employment in developing countries. Journal of knowledge and development, sixth year, No. 15. Pp. 69-85
Mencinger, J. Does Foreign Direct  Investment Always Enhage Economic Growth? Kyklos, 2003, No56, P 491-508
Mickiewicz, T., &  Radosevic, S. &Varblane, U. (2000). The Value of Diversity: Foreign Direct Investment and Employment in Central Europe During Economic Recovery, ESRC One Europe or Several? Programme, Working Paper 05/00,                                                                                               
Mickiewicz, T., & Bell, J. (2000). Unemployment in Transition. Restructuring and Labor Markets in Central Europe. Amsterdam, Harwood Academic Publishers, in print.                                                                                   
Mirza, H. (2008). Transportation cooperation as a representative to transfer business culture to the host country in developing privatization and economic revitalization. Cited by Iran technical and economic fund and investment organization
Najarzade, R., and Maleki, M. (2005). The effect of foreign direct investment on the economic growth of oil exporting countries. Journal of Iran economic studies, No. 23. Pp. 87-105
Nesabiyan, Sh. (2006). The role of foreign direct investment on employment in Iran. Economic Bulletin, sixth year, No 3. Pp. 97-122
Oh, R.S., & Khan, H. , & Koh, A.J.  (2001). A Travel BalanceApproach for Examining Tourism Area Life Cycles: The Case of Singapore. Journal of Travel Research, No.39, P 426-432.                                                       
Peric, J., & Radic, M. (2011). Sustainable  Foreign  Direct Investment  in Tourism. Sustainable Tourism: Socio-Cultural, Environmental and Economics Impact, NO 14 , P 263-278.                                                 
Qolipour soleimani, A., and Rashidi, F. (2009). Effective factors of tourists’ satisfaction in Iran. Tourism quarterly, No. 16. Pp. 50-60
Taylor, K., & Driffield, N. (2000). Wage Dispersion and the Role of Multinational s: Evidence from UK Panel Data, Discussion Paper in Economics, Cardiff Business school.                                                      
 The United Nations Economic Commission for Europe(UNECE)(2016) Statistical Division. http://www.                                          
The United Nations World Tourism Organization (UNWTO)(2016) Tourism Highlights, Facts & Figures Section at WTO,                                                         
The World Bank. http://www.WorldBank.ORG
William, D. (1999). Foreign Manufacturing Firms in UK: Effects on Employment. Business Review, NO 99, P 393-398.                                
World Travel & Tourism Council (WTTC) (2016) Industry as aPartner for Sustainable Development,                                                 
Zargham, H. (1996). Tourism and strategic model of Islamic Republic of Iran. The center of comprehensive guidance of tourism development and management, Department of tourism and pilgrimage Ministry of Culture and Islamic Guidance
Zeranezhad, M., and Anvari, E. (2005). Function of pooled data in econometrics. Economic studies (Quantitative economics), second year, No. 4. Pp. 21-52