Impact of FDI on Unemployment rate: the case of Kazakhstan

Bc. Rustem Mukhanov

Master's thesis

Abstract:

Foreign Direct Investment (FDI) is recognized as a key driver of economic growth, significantly impacting labor market conditions. This thesis examines the relationship between FDI and unemployment in Kazakhstan by constructing an empirical analysis based on economic theory. By reviewing the literature and research on FDI, unemployment theories, and macroeconomic factors dynamics, the thesis analyzes how foreign investment influences the labor market, especially the unemployment rate. The analysis is based on a time-series dataset, which includes the period from 2001 to 2023; the main empirical tools for analysis are Ordinary Least Squares and Two-Stage Least Squares models. The OLS model serves as the initial estimation of relationships, while the TSLS model aims to deal with potential endogeneity problems in FDI to get reliable and effective estimates of relationships. The empirical findings demonstrate a empirically relevant negative relationship between FDI and unemployment and highlight that increased foreign investment inflow is connected with lower unemployment rates in Kazakhstan. The roles of other macroeconomic variables, such as GDP growth, inflation, education, and public debt on unemployment are also tested. These results highlight the importance of encouraging an investment-friendly environment to get more efficient labor market conditions and provide conditions for economic stability. The study concludes that FDI inflow attraction policies can play a crucial role in diminishing unemployment and stimulating sustainable economic growth in Kazakhstan.

Keywords

Foreign Direct Investment, Unemployment, OLS model, TSLS model, Kazakhstan

Language used: English

Date on which the thesis was submitted / produced: 26. 3. 2025

Thesis defence

• Date of defence: 4. 6. 2025
• Supervisor: prof. Ing. Mansoor Maitah, Ph.D. Ph.D.
• Reader: Robert Koželský, externi

Czech University of Life Sciences Prague

Faculty of Economics and Management

Master programme:
Economics and Management