Human capital formation in Mexico: the role of foreign direct investment in shaping educational gender gaps and regional convergence

Alfonso Carballo, Margherita Corina and Handahamé Dia

Chapter 3 in Augmenting National and International Human Capital, 2026, pp 22-47 from Edward Elgar Publishing

Abstract: This chapter examines the causal relationship between foreign direct investment (FDI) and human capital formation in Mexico over the past four decades, focusing on the effects of trade liberalization under NAFTA on gender gaps and regional convergence. We exploit fluctuations in U.S. GDP as an external instrument within an instrumental variables framework and complement the analysis with an event study. Our findings show that FDI significantly increased educational attainment, though with heterogeneous effects. We provide evidence of educational convergence across Mexican states, particularly in lagging regions where FDI strengthened incentives for schooling. At the same time, while FDI helped to significantly narrow gender gaps by shifting expectations and improving girls’ educational outcomes in high-inflow states, convergence remained uneven, with some regions experiencing persistent disparities. Overall, our results underscore FDI's role as a driver of human capital accumulation, gender equality, and regional convergence, though constrained by unequal access to investment flows.

Keywords: Human Capital; Foreign Direct Investment; Educational Gender Gaps; Regional Convergence; NAFTA; Trade Liberalization (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035318278
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