The Role of Foreign Direct Investment Inflows on Labour Force Participation Rate of Women: A Dynamic Panel Data Analysis

To empirically test the role of foreign direct investment (FDI) inflows on female labour force participation rate, we developed two hypotheses in the theoretical perspective. The first hypothesis assumes that FDI inflows have positive significant effect on female labour force participation rate, and the second hypothesis assumes that FDI inflows have negative significant effect on female labour force participation rate. Since there should exist structural differences for countries with respect to female labour force participation rate, we divided 109 countries into two as 71 high- and 38 low-performing countries with K-means clustering approach over the period of 1996-2021. According to the results of the System GMM estimation, we found that Hypothesis 2 is valid for high-performing countries, and Hypothesis 1 is valid for low-performing countries. We also found that female participation in labour force is self-reinforcing due to strategic complementarity between the past and current levels of labour force participation rate of women.