Impact of Globalization on Labour Productivity in the Malaysian Construction Sector

Abstract: The sector has contributed significantly to the economic growth and employment in Malaysia. In the present era of globalization and liberalization, the growth of the construction sector should be more robust in line with the flexibility in the policies regarding the possession of properties in Malaysia and the increasing global demand. This article aims to analyze the impact of globalization on labor productivity in the construction sector using 1990-2009 panel data collected from the Department of Statistics Malaysia. The construction sector is divided into four sub-sectors, namely, residential building, non-residential building, installation of building and civil engineering. Indicators of globalization such as foreign direct investment (FDI), economic openness and foreign labor are used as part of the independent variable in the analysis. Estimation results show FDI and economic openness are statistically significant in influencing the labor productivity in the construction sector, but the ratio of foreign labor to total employment in the construction sector is not significant.