Workers who are educated abroad acquire human capital specific to the country of foreign study (for example, language capital and country-specific knowledge on firm organization and on social system) which makes them more productive than domestically educated workers when both types of workers are employed by subsidiaries of multinational firms headquartered in the country of foreign study. An increase in foreign-educated labor in an FDI-host country thus attracts more FDI from the country of foreign study. We find evidence from bilateral FDI and foreign-student data for 63 countries over the period of 1963-1998 that strongly supports this prediction. Our findings suggest that foreign-educated labor may account for a sizable portion of growth in FDI flows during the sample period.
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Paper provided by Institute of Economic Research, Korea University in its series Discussion Paper Series with number
0705.
Find related papers by JEL classification: F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements F10 - International Economics - - Trade - - - General
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