The Influence Of FDI On Labor Productivity In Service Industry

With the world economy’s globalization and integration nowadays, China has been one of the pivotal significant economies in the world, at the same time, the connections becoming closed across countries. As an important economic variable, foreign direct investment(FDI) connects China and the world. FDI, as a kind of important capital, is the main carrier of multinational corporations. With the gradual development of global economy, the performance of multinational corporations is very active, while the rapid development of multinational corporations makes contact all over the world more closely. Simultaneously, the world’s attention to the service industry has reached an unprecedented height in recent years. From the aspect of FDI, the introduction of FDI in recent years has gone beyond the first and second industry. Service industry and Service industry FDI has become one of the focus of many scholars.In general, the effect of service industry FDI on the host country’s economy is mainly driving the country’s TFP by the technological progress, and thereby stimulates the host country’s economy growth. Research on this aspect has been very detailed, and the paper aims to explore whether there are other channels or mechanisms for the economic development of the host country in FDI. According to the law of the change of industrial structure, in the process of industrial structure change, the most obvious feature is the labor and capital’s transfer across industries. From the perspective of that, namely the perspective of resource reallocation effect, this paper will study the effect of Service industry FDI on the labor productivity in service industry, the labor productivity is one of the important indexes to measure the economic development. This paper established a static three sector economic model and obtained the relation of service industry FDI and the shifts of labor across sectors, meanwhile, with this basis, the paper acquired the relationship between FDI in service industry and service industry labor productivity and conducted empirical study. Through the VAR model, the paper got the conclusion that the Service industry FDI can influence Service industry labor productivity by the reconfiguration effect.