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Jurnal Ekonomi Malaysia, Volume 50, Issue 2, 2016, pp. 71-81

Impact of globalization on labour productivitiy of the services sector

Abstract :

Globalization leads to various effects that become a major challenge to Malaysia to increase its productivity as a measure of competitiveness. Based on this justification, this study aims to investigate the impact of globalization on the labor productivity of the services sector since the year 2000 of the new millennium era. Therefore, the survey covered a period of 13 years from 2000 to 2012. Using the indicators of globalization consists of foreign direct investment (FDI), the degree of openness of the economy (OPN) and foreign labour (FL), the impact of globalization is analysed using random effects model and Generalized Method of Moments (GMM) dynamic panel model. The finding of the random effects model shows that FDI is positive and significant in influencing labour productivity. This finding is consistent with the finding of the GMM panel model. In contrast, the OPN variable consistently demonstrates a negative relationship for both models, while FL shows inconsistent findings. Regarding policy implications, these findings need to continue to encourage the FDI inflows, especially for large scale investments with a cost relatively cheaper due to FDI could increase the level of labor productivity in the services sector are significant, especially in the long term. Furthermore, investments that can generate jobs with high wages should be encouraged in full, with an efforts to absorb and use new technologies among local investors. This is necessary because the services sector should be driven by knowledge and high technology base so that this sector remains competitive sector to the country.

Keywords : Globalization,GMM panel model,Labour productivity,Random effects model,Services sector
Subject Area : Business, Management and Accounting (miscellaneous) Economics, Econometrics and Finance(all)

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