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Government Policies for Inward Foreign Direct Investment in Developing Countries: Implications for Human Capital Formation and Income Inequality

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  • Dirk Willem te Velde

Abstract

This paper discusses policy options available to government policy makers in developing countries to attract foreign direct investment (FDI) and influence the behaviour of transnational corporations (TNCs), and it focuses on the effects these corporations have on human capital formation and income inequality in host countries. While the central role of human capital formation in development is increasingly recognised in the literature, less is known about the relationship between FDI and human capital formation and the questions whether and how policy should address this remain unanswered. This paper first reviews the effects of TNCs on human capital using a simple supply and demand framework of the market for skills. It then reviews different types of FDI policy and their effectiveness. Finally, it discusses how FDI policy may have affected the interaction between FDI and human capital formation in developing countries. The paper concludes with suggestions for further research ... Ce Document technique examine les différentes options à la disposition des décideurs des pays en développement pour attirer l'investissement direct étranger (IDE) et influencer le comportement des firmes transnationales. Il porte plus particulièrement sur l'impact qu'ont ces firmes sur la formation de capital humain et les inégalités de revenus dans les pays d'accueil. Les travaux de recherche reconnaissent de plus en plus le rôle central que joue la formation de capital humain dans le développement. On sait moins de choses en revanche sur les relations entre IDE et formation du capital humain, ainsi que sur le type de mesures souhaitables pour accompagner ce phénomène. A l'aide d'un cadre simple d'offre et de demande sur le marché des compétences, ce document commence par passer en revue les effets des multinationales sur le capital humain. Il identifie ensuite différentes mesures relatives aux IDE ainsi que leur efficacité, et s'interroge sur l'influence de ces mesures sur ...

Suggested Citation

  • Dirk Willem te Velde, 2002. "Government Policies for Inward Foreign Direct Investment in Developing Countries: Implications for Human Capital Formation and Income Inequality," OECD Development Centre Working Papers 193, OECD Publishing.
    • Handle: RePEc:oec:devaaa:193-en
    DOI: 10.1787/248666671311
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    Cited by:

    1. repec:spo:wpecon:info:hdl:2441/10184 is not listed on IDEAS
    2. Norhanishah Mohamad Yunus, 2020. "Determinants of Foreign Direct Investment: An Analysis on Policy Variables in the Malaysian Manufacturing Industry," International Journal of Asian Social Science, Asian Economic and Social Society, vol. 10(12), pages 746-760, December.
    3. Thierry Mayer, 2006. "Policy Coherence for Development : A Background paper on Foreign Direct Investment," Working Papers hal-01065640, HAL.
    4. Dirk Willem Te Velde & Theodora Xenogiani, 2007. "Foreign Direct Investment and International Skill Inequality," Oxford Development Studies, Taylor & Francis Journals, vol. 35(1), pages 83-104.
    5. Ana Teresa Tavares & Aurora A.C. Teixeira, 2006. "Is Human Capital a Significant Determinant of Portugal’s FDI Attractiveness?," FEP Working Papers 211, Universidade do Porto, Faculdade de Economia do Porto.
    6. repec:spo:wpmain:info:hdl:2441/10184 is not listed on IDEAS
    7. repec:hal:wpspec:info:hdl:2441/10184 is not listed on IDEAS
    8. Miroslav Plojhar & Martin Srholec, 2004. "Politická ekonomie investičních pobídek [Political economics of investment incentives]," Politická ekonomie, Prague University of Economics and Business, vol. 2004(4), pages 449-464.
    9. repec:hal:spmain:info:hdl:2441/10184 is not listed on IDEAS
    10. Veasna Kheng & Sizhong Sun & Sajid Anwar, 2017. "Foreign direct investment and human capital in developing countries: a panel data approach," Economic Change and Restructuring, Springer, vol. 50(4), pages 341-365, November.

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