| As an eastern coast province, Shandong always takes the lead in the reform and opening up and attracting and utilizing foreign investment. Although starting relatively late, foreign direct investment (FDI) in Shandong Province has been growing rapidly. At the beginning of the reform and opening up, there is a poor investment environment and a smaller proportion of foreign investment in the national economy. Since the 1990s, relying on its excellent location and abundant labor resources, FDI has increased quickly in Shandong. From 2002 onwards, Shandong has become the third largest province of using foreign investment second only to Guangdong and Jiangsu province. In the post-crisis era, Shandong changes the way of utilizing foreign capital and puts more emphasis on FDI’s quality. Now FDI has gained the new opportunities of development in Shandong. Statistical data analysis shows that for a long time, Shandong’s FDI mainly concentrates on the secondary industry and recent years focuses on tertiary industry, FDI promotes the regional economic development by leaps and bounds and contributes a lot to the upgrading of industrial structure in Shandong.Employment has a vital bearing on the people’s livelihood. Shandong is a populous province, having an oversupply of labor force, combined with structural contradictions of employment due to industry upgrading, leading to a grim employment situation. Therefore, Shandong introduces proactive employment policies and the tertiary industry attracts lots of labor. Respectively, there is a declining trend of labor force in the first industry. The employment in the second industrial is on a weak rise. The proportion of employment in tertiary industry employment has increased from 13.9% in 1992 to 33.8% in 2013, but compared with developed countries and regions, it is still a low proportion. Constant industrial structure upgrading will promote the employment structure and encourage labor shift between the three industries. Therefore, the employment structure will be gradually improved with the industrial structure.With the unequal tilt of FDI in the three industries, FDI’s impact on employment deserves more attention. It is a complex influence. For developing countries, the effect can be positive, negative or a multiplier effect. This paper uses statistical data of Shandong Province and vector auto-regression (VAR) model to determine whether there is a significant statistical relationship between FDI and labor shift among the three industries and find its respective impact and contribution rate. This paper is intended to provide relevant experience and suggestions to Shandong provincial government and contribute to the industrial structure upgrading and the employment problem solving.This paper first reviews existing researches of domestic and foreign scholars, analyzes FDI’s current situation in Shandong. Besides, this paper further analyzes the employment structure in Shandong, the labor distribution in the three industries and the relationship between FDI and employment structure. Further, this paper uses statistical data of Shandong, introduces VAR model to analyze FDI’s impact labor transfer among industries, and does impulse response and variance decomposition to test the labor flows under the impact of FDI. Finally, this paper gives summary and corresponding policy recommendations.The results show that FDI has a significant impulse in the labor transfer. It has the highest contribution rate to secondary industry (79.6076%) and a relatively low rate to primary and tertiary industry. FDI induces labor flows from primary industry towards secondary industry and then from secondary industry to tertiary industry. Specific measures include improving the investment environment and keeping expanding the size of FDI; actively guiding the flow of FDI to serve the upgrading of industrial structure and lead a reasonable labor flow among the three industries; seizing the opportunity and using the strategy of’One Belt and One Road’ and China-Korea Free Trade Area to make a greater contribution to the economic growth and employment improvement of Shandong province. |
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