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Analyzing the relationship between inward FDI, education and entrepreneurial activity at the macro-level

Author

Listed:
  • Jenny Berrill

    (Trinity College Dublin)

  • Martha O’Hagan-Luff

    (Trinity College Dublin)

  • André Van Stel

    (Trinity College Dublin & Kozminski University)

Abstract

We investigate the roles of inward FDI and education in explaining country levels of entrepreneurship. It is widely recognised that inward FDI may have positive but also negative spillover effects on entrepreneurial activity. We argue that both types of spillovers (positive and negative) may be reinforced by high education levels of the labour force. Using a database across 75 countries between 2001 and 2015, we estimate a 2SLS model that tests for this moderating role of education. We find support for a negative interaction effect of FDI and macro-level education on the rate of entrepreneurial activity, suggesting that in countries with highly educated labour forces, inward FDI leads to more jobs in the wage sector rather than a higher number of entrepreneurs. Policy implications are discussed.

Suggested Citation

  • Jenny Berrill & Martha O’Hagan-Luff & André Van Stel, 2021. "Analyzing the relationship between inward FDI, education and entrepreneurial activity at the macro-level," Revista de Economía Laboral - Spanish Journal of Labour Economics, Asociación Española de Economía Laboral - AEET, vol. 18, pages 52-73.
    • Handle: RePEc:rel:journl:y:2021:v:18:n:1:p:52-73
    Note: Vol. 18, Núm. 1 (2021)
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    More about this item

    Keywords

    entrepreneurial activity; inward FDI; spillover effects;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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