Asymmetric Effects of Foreign Worker Employment on Sectoral Labor Productivity : A Malaysian Perspective

Neng, Long Hii and Evan, Lau (2024) Asymmetric Effects of Foreign Worker Employment on Sectoral Labor Productivity : A Malaysian Perspective. In: inance, Economics & Business Sustainability (FEBS) Conference 2024, 18-20 November 2024, Hilton Hotel , Kuching, Sarawak.

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Abstract

This research examines the asymmetric effects of foreign worker employment and the impact of low educational attainment on Malaysian sectoral labor productivity from 1991–2019 using the nonlinear autoregressive distributed lag (NARDL) model. It explores how an overdependence on foreign workers and low-skilled labor affects productivity. Model 1 for agriculture underscores positive variations visà-vis how foreign worker employment boosts agricultural productivity in both the short and long term. However, negative variations lead to diminished productivity in the long run. Attaining only primary education negatively affects long-term agricultural productivity. In Model 2 for industry, neither foreign worker employment nor low educational attainment significantly affects productivity. Model 3 for service reveals a short-term boost in productivity with increased foreign workers’ employment, whereas reduced employment enhances long-term productivity. The absence of formal education is detrimental to longterm service productivity, while primary education affects it negatively in the short term. The NARDL multiplier graph emphasizes that positive employment changes predominantly boost agricultural and service productivity, particularly in the initial three years. The Wald test substantiates the significant long-run asymmetric effects of foreign workers only on agricultural and service productivity.

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