Foreign Direct Investment, Economic Growth, and the Human Capital Threshold: Evidence from US States *

Timothy C. Ford, Jonathan C. Rork and Bruce T. Elmslie

Review of International Economics, 2008, vol. 16, issue 1, pages 96-113

Abstract: The United States has experienced a dramatic increase in foreign direct investment (FDI) in recent years. While foreign firms bring immediate benefits of high-paying jobs, data limitations have prevented detailed study on FDI's long-term effects on the states receiving it. By creating a new stock measure of FDI based on employment, we are able to capture these long-term effects. Results demonstrate that FDI has a greater impact on per capita output growth than domestic investment for US states that meet a minimum human capital threshold. Ironically, the most active states in the recruitment of FDI tend to fall below this threshold. Copyright © 2008 The Authors; Journal compilation © 2008 Blackwell Publishing Ltd.

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