The employment effect of inward FDI in China: What do we learn from the history?

We investigate the influence of colonial legacy on the nexus between inward foreign direct investment (FDI) and labor market. Based on a panel dataset of 275 Chinese cities (2011-2017) along with the information about the Chinese modern history (1842-1955), we find that the inward FDI has a positive effect on employment and such an effect is more pronounced in the regions with colonial influence than their counterparts. We find that the experience of Western colonization strengthens the positive effect of inward FDI on employment whereas the experience of Japanese colonization weakens or even overturns this positive effect.