Human capital, FTAs and foreign direct investment flows into ASEAN

Shandre M. Thangavelu and Dionisius Narjoko

Journal of Asian Economics, 2014, vol. 35, issue C, 65-76

Abstract: In this paper, we examine the impact of foreign direct investment flows into ASEAN in a gravity model using the bilateral FDI data from 2000 to 2009. In particular, we study the key factors that determine the FDI flows into the region including human capital development and whether membership of a bilateral or regional trade agreement has a differential impact on FDI flows using an extended gravity model. The empirical results indicate that free trade agreements do have positive impact on FDI inflows. However, the returns on FDI inflows depend on the domestic absorptive capacity of the economy and region. It is imperative for ASEAN to align its infrastructure, human capital and technologies to provide MNCs with the necessary linkages to the global network and also to move the domestic industries seamlessly up the global production value-chain. The paper highlights that this is crucial for deeper ASEAN integration and for sustainable growth in the region.

Keywords: Bilateral FDI; Free trade agreements; Human capital (search for similar items in EconPapers)
JEL-codes: F21 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:35:y:2014:i:c:p:65-76

DOI: 10.1016/j.asieco.2014.11.002

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