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Optimal foreign direct investment in the presence of human capital formation

Author

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  • Asali, Muhammad
  • Cristobal-Campoamor, Adolfo

Abstract

This paper gives both theoretical arguments and econometric support to the notion of optimal FDI levels, from the viewpoint of human-capital formation in the host country. The optimality of a limited FDI level depends on the local incentives to get trained. Those incentives are formed in the face of uncertainty and asymmetric information between the multinational and its potential workers. Our estimates confirm the significance of a negative, non-linear impact of FDI per capita on tertiary schooling, both in developed and developing countries.

Suggested Citation

  • Asali, Muhammad & Cristobal-Campoamor, Adolfo, 2011. "Optimal foreign direct investment in the presence of human capital formation," MPRA Paper 31460, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:31460
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    File URL: https://mpra.ub.uni-muenchen.de/31460/1/MPRA_paper_31460.pdf
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    References listed on IDEAS

    as
    1. Docquier, Frederic & Rapoport, Hillel, 2004. "Skilled migration: the perspective of developing countries," Policy Research Working Paper Series 3382, The World Bank.
    2. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
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    4. Daniele Checchi & Gianfranco De Simone & Riccardo Faini, 2007. "Skilled Migration, FDI and Human Capital Investment," UNIMI - Research Papers in Economics, Business, and Statistics unimi-1067, Universitá degli Studi di Milano.
    5. Markusen, James R. & Venables, Anthony J., 1999. "Foreign direct investment as a catalyst for industrial development," European Economic Review, Elsevier, vol. 43(2), pages 335-356, February.
    6. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
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    More about this item

    Keywords

    FDI; Human-Capital Formation; Education; Skill Heterogeneity;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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