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

Timothy Ford, Jonathan Rork and Bruce T. Elmslie

Review of International Economics, 2008, vol. 16, issue 1, 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.

Date: 2008
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