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Foreign Direct Investment and Country-Specific Human Capital

Jinyoung Kim () and Jungsoo Park ()

No 705, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: Workers who are educated abroad acquire human capital specific to the country of foreign study (for example, language capital and country-specific knowledge on firm organization and on social system) which makes them more productive than domestically educated workers when both types of workers are employed by subsidiaries of multinational firms headquartered in the country of foreign study. An increase in foreign-educated labor in an FDI-host country thus attracts more FDI from the country of foreign study. We find evidence from bilateral FDI and foreign-student data for 63 countries over the period of 1963-1998 that strongly supports this prediction. Our findings suggest that foreign-educated labor may account for a sizable portion of growth in FDI flows during the sample period.

Keywords: foreign direct investment; multinational firm; human capital; foreign education; students abroad (search for similar items in EconPapers)
JEL-codes: F21 F10 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-edu, nep-fdg, nep-hrm, nep-lab and nep-mig
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Journal Article: FOREIGN DIRECT INVESTMENT AND COUNTRY-SPECIFIC HUMAN CAPITAL (2013) Downloads
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