The Effects of Trade Integration, Globalization and Foreign Direct Investments on Employment in Iranian Manufacturing Sector

This paper focuses on two major aspects of globalization: international trade and FDI and their impacts on manufacturing employment in Iran and study whether foreign direct investment and trade expansion with Asian and European partner played any role in shaping the Iranian manufacturing employment structure. This study incorporates globalization (KOF index), trade integration and FDI into a single model and uses a system GMM estimator, which is more appropriate for a short panel dataset than the static or first differenced GMM estimator. Result show that foreign direct investment corresponds positively to Iran’s manufacturing employment in both Asian and European trade partner. The findings show that globalization in Iran and Asian partner has no significant impact on employment. In terms of trade expansion, the role of bilateral exports with European partner is stronger than Asian partner.