{"title":"The Nexus Between Foreign Direct Investment, Informal and Formal Sectors in Sri Lanka","authors":"T. Bhavan","doi":"10.1177/13915614231158729","DOIUrl":null,"url":null,"abstract":"The purpose of this study is to investigate the bilateral relationship among formal, informal and foreign direct investment (FDI) in the case of Sri Lanka during the period from 1990 to 2019. Using annual time series data, the Two Stage Least Square method is employed to investigate the relationship among the endogenous variables. The results derived from the analysis suggest that the integration between formal and informal sectors and formal sector and FDI are positive and have significant impacts on each other. However, the negative and significant impacts of the informal sector and FDI on each other further suggest that the integration between the informal sector and FDI did not give an optimistic signal to the country to contemplate that the informal sector is supporting foreign investors. At the same time, a sign that FDI discourages informal sector progression in the results has triggered the attention of further investigations on whether foreign investment agglomeration in Sri Lanka promotes informal-formal sectoral transformation at the cost of the informal sector. However, this study proposes an interest in sound policy requirements to reshape the informal sector towards the interest of foreign direct investors and informal-formal sector transformation. JEL Codes: E26, F21, J21, J46","PeriodicalId":39966,"journal":{"name":"South Asia Economic Journal","volume":null,"pages":null},"PeriodicalIF":0.0000,"publicationDate":"2023-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"South Asia Economic Journal","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1177/13915614231158729","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 0
Abstract
The purpose of this study is to investigate the bilateral relationship among formal, informal and foreign direct investment (FDI) in the case of Sri Lanka during the period from 1990 to 2019. Using annual time series data, the Two Stage Least Square method is employed to investigate the relationship among the endogenous variables. The results derived from the analysis suggest that the integration between formal and informal sectors and formal sector and FDI are positive and have significant impacts on each other. However, the negative and significant impacts of the informal sector and FDI on each other further suggest that the integration between the informal sector and FDI did not give an optimistic signal to the country to contemplate that the informal sector is supporting foreign investors. At the same time, a sign that FDI discourages informal sector progression in the results has triggered the attention of further investigations on whether foreign investment agglomeration in Sri Lanka promotes informal-formal sectoral transformation at the cost of the informal sector. However, this study proposes an interest in sound policy requirements to reshape the informal sector towards the interest of foreign direct investors and informal-formal sector transformation. JEL Codes: E26, F21, J21, J46
期刊介绍：
The South Asian nations have progressively liberalized their economies in recent years in an effort to integrate with the world economy. They have also taken steps to enhance multilateral and regional economic integration. Even though the South Asian economies have grown at an average rate of more than 5 per cent over the last few years, roughly 40 per cent of their people still live below the poverty line. Hence, the South Asian region continues to face many challenges of economic and social development. The South Asia Economic Journal (SAEJ) is designed as a forum for informed debate on these issues, which are of vital importance to the people of the region who comprise one-sixth of the world’s population. The peer-reviewed journal is devoted to economic analysis and policy options aimed at promoting cooperation among the countries comprising South Asia. It also discusses South Asia’s position on global economic issues, its relations with other regional groupings and its response to global developments. We also welcome contributions to inter-disciplinary analysis on South Asia. As a refereed journal, SAEJ carries articles by scholars, economic commentators,policy-makers and officials, from both the private and public sectors. Our aim is to create a vibrant research space to explore the multidimensional economic issues of concern to scholars working on South Asia. Among the issues debated in relation to South Asia are: - the implications of global economic trends; - the issues and challenges by WTO; - approaches to industrialization and development; - the role of regional institutions such as the SAARC; - the relationship between SAARC and other regional economic groupings such as ASEAN; - the implications of economic liberalization for trade and investment in the region; - new initiatives that can be launched to enhance economic cooperation among the South Asian countries both on a bilateral and a regional basis.
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