Foreign direct investment and human capital in developing countries: a panel data approach

Veasna Kheng (), Sizhong Sun and Sajid Anwar
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Veasna Kheng: James Cook University

Economic Change and Restructuring, 2017, vol. 50, issue 4, No 2, 365 pages

Abstract: Abstract Theoretical studies have shown that there is a direct relationship between human capital and foreign direct investment (FDI). However, only a few available empirical studies have attempted to investigate this relationship simultaneously. Using country level panel data from 55 developing countries over the 1980–2011 period, this paper examines the interrelationship between FDI and human capital. Statistical analysis, based on simultaneous equations fixed effect estimation, reveals significant bi-directional causality between human capital and FDI, which suggests that FDI and human capital development policies need to be coordinated. FDI-led economic growth models may not be entirely suitable for all developing countries aiming to replicate the economic success of countries such as Brazil and China unless attention is also paid to human capital development through increased spending on education and training.

Keywords: Foreign direct investment; Human capital; Two-way causality; Developing countries; Panel data estimation (search for similar items in EconPapers)
JEL-codes: F21 I25 O15 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (31)

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DOI: 10.1007/s10644-016-9191-0

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