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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.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp1030.

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Length: pages
Date of creation: 01 Feb 2012
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Handle: RePEc:wdi:papers:2012-1030

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Keywords: Human capital; Training; Firm-level efficiency; Multinational enterprises;

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  1. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
  2. Margono, Heru & Sharma, Subhash C., 2006. "Efficiency and productivity analyses of Indonesian manufacturing industries," Journal of Asian Economics, Elsevier, vol. 17(6), pages 979-995, December.
  3. Bhaumik, Sumon K. & Dimova, Ralitza, 2011. "Good and Bad Institutions: Is the Debate Over? Cross-Country Firm-Level Evidence from the Textile Industry," IZA Discussion Papers 5471, Institute for the Study of Labor (IZA).
  4. S. K. Bhaumik & S. Gangopadhyay & S. Krishnan, 2008. "Policy, economic federalism, and product market entry: the Indian experience," European Journal of Development Research, Taylor and Francis Journals, vol. 20(1), pages 1-30.
  5. Nazmul Chaudhury & Jeffrey Hammer & Michael Kremer & Karthik Muralidharan & F. Halsey Rogers, 2006. "Missing in Action: Teacher and Health Worker Absence in Developing Countries," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 91-116, Winter.
  6. 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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