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Education Systems and Foreign Direct Investment: Does External Efficiency Matter?

Elisé Miningou and Sampawende Tapsoba

No 2017/079, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the effect of the efficiency of the education system on Foreign Direct Investment (FDI). First, it focuses on the external efficiency and applies a frontier-based measure as a proxy of the ability of countries to optimally convert the average years of schooling into income for individuals. Second, it shows the relationship between the external efficiency of the education system and FDI inflows by applying GMM regression technique. The results show that the efficiency level varies across regions and countries and appears to be driven by higher education and secondary vocational education. Similarly to other studies in the literature, there is no significant relationship between the average years of schooling and FDI inflows. However, this study shows that the external efficiency of the education system is important for FDI inflows. Improving the external efficiency of the education system can play a role in attracting FDI especially in non-resource rich countries, nonlandloked countries and countries in the low and medium human development groups.

Keywords: WP; labor market; standard deviation; FDI inflow; interest rate; FDI; Human Capital; Education System; External Efficiency; FDI attractiveness; efficiency of the education system; FDI flow; FDI determinant; FDI data; Foreign direct investment; Labor markets; Personal income; Sub-Saharan Africa; Middle East; North Africa; South Asia; East Africa (search for similar items in EconPapers)
Pages: 23
Date: 2017-03-30
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Citations: View citations in EconPapers (5)

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Journal Article: Education systems and foreign direct investment: does external efficiency matter? (2020) Downloads
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Handle: RePEc:imf:imfwpa:2017/079