Local human capital formation and optimal FDI. Issue 5 (3rd July 2016)

• Record Type: Journal Article
• Authors: Asali, Muhammad; Cristobal-Campoamor, Adolfo; Shaked, Avner
• Is Part Of: Journal of international trade & economic development. Volume 25:Issue 5(2016)
• Page Start: 691
• Page End: 705
• Publication Date: 2016-07-03
• Subjects: Foreign direct investment -- human capital -- skilled labour -- information; International trade -- Periodicals; Economic development -- Periodicals; 337
• DOI: 10.1080/09638199.2015.1118527
• Languages: English
• ISSNs: 0963-8199

Abstract

ABSTRACT: This paper lends both theoretical and empirical support to the notion of optimal foreign direct investment (FDI) levels. It does so by uncovering an inverted-U-shaped relationship between FDI and human capital formation. The optimality of a particular FDI inflow depends on the educational incentives induced by FDI on the local, heterogeneous population. Our estimates confirm the significance of a positive (linear) and a negative (non-linear) impact of FDI stocks on tertiary schooling, which are exclusively relevant in developing countries.