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Does Foreign Direct Investment Promote Human Capital Accumulation? The Role of Gradual Financial Liberalization

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  • Meng Sun
  • Qichun He

Abstract

We argue that the effect of inward foreign direct investment (FDI) on domestic human capital (HC) accumulation depends on the degree of financial deregulation. Using 383 observations from provincial yearly panel data of the reform period in China, we find the following: FDI has a positive and significant interaction effect with financial deregulation on HC in both least squares dummy variable and system generalized method of moments estimations that address the endogeneity of all important explanatory variables including FDI, financial deregulation, and their interaction term. That is, a higher level of financial deregulation increases the marginal effect of inward FDI on domestic HC.

Suggested Citation

  • Meng Sun & Qichun He, 2014. "Does Foreign Direct Investment Promote Human Capital Accumulation? The Role of Gradual Financial Liberalization," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(4), pages 163-175.
    • Handle: RePEc:mes:emfitr:v:50:y:2014:i:4:p:163-175
    DOI: 10.2753/REE1540-496X500410
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    Cited by:

    1. Simplice A. Asongu & Nicholas M. Odhiambo, 2019. "Boosting quality education with inclusive human development: empirical evidence from sub-Saharan Africa," Working Papers of the African Governance and Development Institute. 19/017, African Governance and Development Institute..
    2. Asongu, Simplice & Odhiambo, Nicholas, 2019. "Enhancing ICT for Quality Education in Sub-Saharan Africa," MPRA Paper 93531, University Library of Munich, Germany.
    3. Akram Masoud Haddad, 2018. "The Impacts of the Inwards and Outwards FDI on the Development Measured By HDI: the Case of United Arab Emirate," International Journal of Economics and Financial Issues, Econjournals, vol. 8(4), pages 301-312.
    4. Simplice A. Asongu & Nicholas M. Odhiambo, 2020. "The role of governance in quality education in sub-Saharan Africa," Working Papers of the African Governance and Development Institute. 20/077, African Governance and Development Institute..
    5. Boubacar, Inoussa, 2016. "Spatial determinants of U.S. FDI and exports in OECD countries," Economic Systems, Elsevier, vol. 40(1), pages 135-144.

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