Does Aid for Education Attract Foreign Investors? An Empirical Analysis for Latin America

Julian Donaubauer, Dierk Herzer and Peter Nunnenkamp

No 120, FIW Working Paper series from FIW

Abstract: We address the question of whether foreign aid helps attract foreign direct investment (FDI). This could be achieved if well targeted aid removed critical impediments to higher FDI inflows. In particular, we test the hypothesis that aid for education is an effective means to increase FDI flows to host countries in Latin America where schooling and education appears to be inadequate from the viewpoint of foreign investors. We employ panel data techniques covering 21 Latin American countries over the period from 1984 to 2008. We find that aid for education has a statistically significant positive effect on FDI. This effect is robust to potential outliers, sample selection, alternative specifications and different estimation methods.

Keywords: foreign aid; foreign direct investment; aid effectiveness; human capital (search for similar items in EconPapers)
JEL-codes: E24 F21 F35 O15 O19 (search for similar items in EconPapers)
Pages: 35
Date: 2013-04
New Economics Papers: this item is included in nep-dev, nep-edu, nep-int and nep-lam
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Citations: View citations in EconPapers (8)

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Working Paper: Does aid for education attract foreign investors? An empirical analysis for Latin America (2012)
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