Foreign Direct Investment and China's Employment Structure Transformation: An Empirical Analysis Based on Urban Panel Data

Abstract

Against the backdrop of high-quality development and an employment-first strategy, how foreign direct investment ( ) shapes urban employment structures is of significant practical importance, as it relates to industrial upgrading and the well-being of the people, contributing new insights from three aspects: research perspective, data granularity, and heterogeneity analysis. This paper uses panel data from 283 prefecture-level cities and four municipalities in China from 2010 to 2023 to construct a two-way fixed effects model and analyze the impact of  on the proportion of employment in the secondary industry. The findings reveal that  significantly increases the share of employment in the secondary sector, and this conclusion holds under a series of robustness tests. Heterogeneity analysis indicates that the effect is stronger in ordinary prefecture-level cities and central-western regions, while it is insignificant or negative in eastern regions, municipalities/sub-provincial cities, and northeastern regions; has a certain “crowding-out” effect on the tertiary sector and a weak impact on the primary sector; its role is more pronounced in cities with relatively underdeveloped digital inclusive finance. Based on these findings, the study proposes differentiated investment attraction and employment coordination strategies to enhance the structural employment spillover effects of .