Foreign direct investment and human capital in developing countries: a panel data approach

Kheng, Veasna, Sun, Sizhong, and Anwar, Sajid (2017) Foreign direct investment and human capital in developing countries: a panel data approach. Economic Change and Restructuring, 50 (4). pp. 341-365.

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Theoretical studies have shown that there is a direct relationship between human capital and foreign direct investment (FDI). However, only a few available empirical studies have attempted to investigate this relationship simultaneously. Using country level panel data from 55 developing countries over the 1980–2011 period, this paper examines the interrelationship between FDI and human capital. Statistical analysis, based on simultaneous equations fixed effect estimation, reveals significant bi-directional causality between human capital and FDI, which suggests that FDI and human capital development policies need to be coordinated. FDI-led economic growth models may not be entirely suitable for all developing countries aiming to replicate the economic success of countries such as Brazil and China unless attention is also paid to human capital development through increased spending on education and training.

Item ID: 53038
Item Type: Article (Research - C1)
ISSN: 1574-0277
Keywords: foreign direct investment; human capital; two-way causality; developing countries; panel data estimation
Date Deposited: 04 Apr 2018 23:58
FoR Codes: 44 HUMAN SOCIETY > 4404 Development studies > 440407 Socio-economic development @ 60%
38 ECONOMICS > 3801 Applied economics > 380110 International economics @ 40%
SEO Codes: 91 ECONOMIC FRAMEWORK > 9101 Macroeconomics > 910103 Economic Growth @ 100%
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