Globalization and its effect on manufacturing employment: the case of Peru 1993-2000

Resumen

In this paper we will examine the effects of globalization on employment level, in particular the case of the manufacturing industry -considered one of the key sectors where employment is supposed to be generated. The exercise that we will perform is justified on the basis that the whole set of laws and statutes dealing with the new institutional changes in Peru carried out during the nineties were designed to foster private -especially foreign- investment in every economic sector, without any bias regarding to specific industries.

Using a panel data analysis we showed that foreign direct investment- for the 1994-2000 period- had a positive though very small effect on the creation of manufacturing employment. The results also show that both the size of the market and the export orientation were more important in explaining changes in employment in the manufacturing sector. Our results also showed to be consistent with the fact that most of the FDI in the manufacturing sector was primarily directed to mergers and  acquisitions,  instead  of  creating  new  businesses,  therefore contributing to the creation of new employment.