Assessing the relationship between total factor productivity and foreign direct investment in an economy with a skills shortage: the case of South Africa

Lumengo Bonga-Bonga and Maphelane Phume ()
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Maphelane Phume: University of Johannesburg

Economics Bulletin, 2018, vol. 38, issue 3, 1395-1405

Abstract: This paper assesses the relationship between total factor productivity (TFP) and foreign direct investment (FDI) in a country with skills shortage. South Africa is used as a case study. Literature is inconclusive on how FDI should affect TFP. This paper shows that it is important to account for the interactivity between FDI and human capital when assessing the effects of FDI on TFP. Moreover, the empirical results show that, contrary to countries with abundance of skills, in countries with skills shortage, it is in fact the change in stock of human capital - or human capital accumulation – that matters in determining the effects of FDI on TFP.

Keywords: Total factor productivity; foreign direct investment; human capital (search for similar items in EconPapers)
JEL-codes: C1 O4 (search for similar items in EconPapers)
Date: 2018-07-18
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Citations: View citations in EconPapers (2)

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Working Paper: Assessing the relationship between total factor productivity and foreign direct investment in an economy with a skills shortage: the case of South Africa (2017)
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