Abstract

A substantial number of recent studies were devoted to investigating the effects of Foreign direct investment (FDI) on different economic variables. Although the connection between growth and investments is widely acknowledged, the connection between FDI and the unemployment rate is not easy to determine. Taking into consideration the dispute over the true effect of FDI on the host country’s economic performance, the study’s main purpose is to take advantage of the dispute and study the effect of foreign direct investment (FDI) on the unemployment rate (U) in the Kingdom of Saudi Arabia (KSA). Using Ordinary Least Square Model (OLS), the study takes the unemployment rate as a dependent variable, and FDI and Output as two explanatory variables over the period of 2005-2018. The study supports our assumption that the inflows of the FDI and the total output negatively and significantly affect the unemployment rate in the KSA; the inflows of the FDI creates more job opportunities and will reduce the unemployment rate in KSA. Our recommendation is that the KSA government should implement more policies to attract more inflows of “Quality FDI” to attain the maximum goals and to decrease the total unemployment rate.

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