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Foreign direct investment and economic complexity in developing countries: does public expenditure on education matter?

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  • Idrys Fransmel Okombi

    (Marien Ngouabi University)

  • Beaudelaire Francois Tsinguia-Kenfack

    (Marien Ngouabi University)

Abstract

The issue of the impact of foreign direct investment (FDI) on economic complexity has received increasing attention in recent literature. However, the moderating factors of the impact of FDI on economic complexity and the sectoral aspect of FDI are largely ignored in the literature. The goal of this study is to examine the effects of sectoral FDI on economic complexity, taking into account the importance of public spending on primary and secondary education. The analysis uses a sample of 33 developing countries for the period 2007–2020, and the in-system Generalized Method of Moments (GMM) which controls unobserved heterogeneity, heteroscedasticity, simultaneity, reverse causality and endogeneity. The results show that total FDI, FDI of secondary sector and FDI of tertiary sector yield a positive effect on economic complexity on one hand, while public expenditures of primary and secondary education amplifies this effect on the other hand. However, FDI of primary sector has no effect on the capacities of host countries. The findings of the study have relevant policy implications for investment promotion agencies, leaders of transnational corporations, as well as education policy practitioners.

Suggested Citation

  • Idrys Fransmel Okombi & Beaudelaire Francois Tsinguia-Kenfack, 2024. "Foreign direct investment and economic complexity in developing countries: does public expenditure on education matter?," SN Business & Economics, Springer, vol. 4(1), pages 1-38, January.
    • Handle: RePEc:spr:snbeco:v:4:y:2024:i:1:d:10.1007_s43546-023-00614-1
    DOI: 10.1007/s43546-023-00614-1
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    More about this item

    Keywords

    Foreign direct investment; Economic complexity; Productive capacities; Public expenditure;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid

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