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Does human capital endowment of FDI recipient countries really matter? Evidence from cross-country firm level data

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  • Sumon Bhaumik
  • Ralitza Dimova

Abstract

The stylized literature on foreign direct investment suggests that developing countries should invest in the human capital of their labour force in order to attract foreign direct investment. However, if educational quality in developing country is uncertain such that formal education is a noisy signal of human capital, it might be rational for multinational enterprises to focus more on job-specific training than on formal education of the labour force. Using cross-country data from the textiles and garments industry, we demonstrate that training indeed has greater impact on firm efficiency in developing countries than formal education of the work force.

Suggested Citation

  • Sumon Bhaumik & Ralitza Dimova, 2012. "Does human capital endowment of FDI recipient countries really matter? Evidence from cross-country firm level data," William Davidson Institute Working Papers Series wp1030, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:2012-1030
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    References listed on IDEAS

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    3. Sumon Kumar Bhaumik & Ralitza Dimova, 2014. "Good and bad institutions: is the debate over? Cross-country firm-level evidence from the textile industry," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 38(1), pages 109-126.
    4. Noorbakhsh, Farhad & Paloni, Alberto & Youssef, Ali, 2001. "Human Capital and FDI Inflows to Developing Countries: New Empirical Evidence," World Development, Elsevier, vol. 29(9), pages 1593-1610, September.
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    More about this item

    Keywords

    Human capital; Training; Firm-level efficiency; Multinational enterprises;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development

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