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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 ...

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File URL: http://dx.doi.org/10.1787/248666671311
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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Development Centre Working Papers with number 193.

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Date of creation: Aug 2002
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Handle: RePEc:oec:devaaa:193-en

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Cited by:
  1. Thierry Mayer, 2006. "Policy Coherence for Development: A Background Paper on Foreign Direct Investment," OECD Development Centre Working Papers 253, OECD Publishing.
  2. 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.

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