Human Capital Development and Its Influence on FDI Withdrawal: An Empirical Analysis

Chuanchuan Li, Lei Li, Haodan Tang, Yanyan Zheng and Fangming Gong

China & World Economy, 2023, vol. 31, issue 5, 116-134

Abstract: This paper examines the causal effect of human capital expansion on the exit of foreign‐owned firms using the difference‐in‐differences method together with a quasi‐natural experiment involving the expansion of higher education in China in 1999. The expansion of human capital reduces the probability of the exit of foreign‐owned firms significantly. This conclusion remains robust under a series of tests, including changing the sample range, adjusting the identification method, and considering the trade liberalization. Analysis of the mechanism indicates that human capital expansion reduces the exit probability of foreign‐owned firms by stimulating innovation, improving production efficiency, and optimizing the quality of input and output goods. Industries with higher asset specificity are also more likely to restrain the exit of foreign‐owned firms through human capital expansion. Overall, the findings of this study provide a good insight into the exit behavior of FDI in China from the perspective of human capital.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/cwe.12504

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:chinae:v:31:y:2023:i:5:p:116-134

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1671-2234

Access Statistics for this article

China & World Economy is currently edited by Yongding Yu

More articles in China & World Economy from Institute of World Economics and Politics, Chinese Academy of Social Sciences Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().