Foreign Direct Investment Inflows and Human Capital Development, Apparent Links and the Effect of Transmission Mechanism: Evidence from Burkina Faso

Porto Bazie and Alain Alain SIRI

Working Papers from African Economic Research Consortium

Abstract: Meeting the challenge of human capital development is a concern for governments and development practitioners in developing countries. However, foreign direct investment (FDI) inflows appear to be a means of meeting this challenge by increasing incomes, mobilising tax revenues, bvoosting productivity and disseminating skills and technologies. The purpose of this paper is to analyse the FDI effects on human capital development through the channel of tax revenue mobilisation. A structural simultaneous equation model, ARDL modelling, and interviews, were used to analyse the data. The results indicate that FDI is a vehicle for tax revenue mobilisation. They also show that tax revenues increase spending on primary, secondary and tertiary education, while FDI significantly enhances primary and tertiary education levels in the long term but reduces secondary education levels in Burkina Faso. In the short term, FDI reduces tertiary education levels but does not affect primary and secondary education levels. The results further show that the Corporate Social Responsibility (CSR) channel is also an effective means of developing human capital through FDI.

Date: 2024-08-05
Note: African Economic Research Consortium
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