1OK Foreign Labour on Malaysian Growth - Foreign Labour on Malaysian Growth Journal of Economic Integration jei jei Vol.29 No.4 December 2014 657~675

1OK Foreign Labour on Malaysian Growth - Foreign Labour on...

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jeiAbstractThis paper is to examine the impact of foreign labour on Malaysian economic growth using panel data from three sectors: manufacturing, services, and construction for the period of 1990~2010. The short run and long run effects of foreign labour on output growth are analysed using the Autoregressive Distributed Lag approach. The study shows that the skilled and semi-skilled foreign labours have a positive and significant impact on the output growth in both the short run and the long run. However, the study finds that the unskilled foreign labour adversely affects output growth in both the short run and the long run.JEL Classifications: J01, J08Keywords:Skilled Foreign Labour, Semi-skilled Foreign Labour, Unskilled Foreign Labour, Economic Growth Foreign Labour on Malaysian GrowthjeiJournal of Economic IntegrationRahmah Ismail Universiti Kebangsaan Malaysia, Selangor, MalaysiaFerayuliani Yuliyusman Universiti Kebangsaan Malaysia, Selangor, Malaysia * Corresponding Author:Rahmah Ismail;School of Economics Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Bangi Selangor 43600, Malaysia; E-mail: [email protected]Co-Author:Ferayuliani Yuliyusman;School of Economics Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Bangi Selangor 43600, Malaysia.Acknowledgement:The authors would like to thank the University Kebangsaan Malaysia for providing a grant to conduct this study. 2014-Center for Economic Integration, Sejong Institution, Sejong University, All Rights Reserved. pISSN: 1225-651X eISSN: 1976-5525Vol.29 No.4, December 2014, 657~675
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jeiVol.29 No.4, December 2014, 657~675 Rahmah Ismail and Ferayuliani Yuliyusman658I. IntroductionMacroeconomists and international trade economists have examined the influence of migration on economic growth, which may be particularly interesting in the context of increasing returns to scale. Rachel and Jeniffer (1995) argue that recent theoretical work has made strides toward explaining the possible links between immigration and growth. Theoretically, the recruitment of migrant workers could have a number of negative effects, including: (i) a reduction in employment rates as employers use migrants to replace native workers (displacement effect); (ii) an increase in the unemployment rate; (iii) reduction in vacancies; and (iv) the suppression of wage levels. According to Green et al. (2007), two main reasons exist concerning why employers recruit migrant workers: (i) to perform jobs that require specialist skills which are not available in the host country (i.e., to address skill shortages and deficiencies); and (ii) to fill in the vacancies for which there are insufficient number of domestic workers.Portes and French (2005) suggest that the effect of foreign labour is traditionally viewed in terms of complementarity or substitutability with natives in the provision of household services. A review of literature shows that results concerning the impact of foreign labour on a host economy have been giving mixed signals. On the one hand,
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