IDEAS home Printed from https://ideas.repec.org/a/eee/ecoedu/v82y2021ics027277572100042x.html
   My bibliography  Save this article

Foreign direct investment and youth educational outcomes in Mexican municipalities

Author

Listed:
  • Ibarra-Olivo, J. Eduardo

Abstract

Inward foreign direct investment (IFDI) has often been considered to play a prominent role in the development of human capital in the host economy by introducing a foreign wage premium into the labour market. However, extant evidence on IFDI labour market effects is inconclusive, especially in emerging economies. We investigate for the case of Mexico whether foreign wage premia have an effect on educational outcomes of young cohorts that were 15 years old at the time of IFDI arrival in their municipality of residence. Results suggest that increasing foreign wage premium for unskilled jobs, both in manufacturing and services, has negative effects on a cohort's subsequent educational outcomes. The effects of foreign wage premium for skilled workers, however, are not significant but may lead to positive educational outcomes. The long-term implications of losses accruing from low investment in human capital do not only affect individuals but regions as well.

Suggested Citation

  • Ibarra-Olivo, J. Eduardo, 2021. "Foreign direct investment and youth educational outcomes in Mexican municipalities," Economics of Education Review, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:ecoedu:v:82:y:2021:i:c:s027277572100042x
    DOI: 10.1016/j.econedurev.2021.102123
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S027277572100042X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econedurev.2021.102123?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. David Atkin, 2016. "Endogenous Skill Acquisition and Export Manufacturing in Mexico," American Economic Review, American Economic Association, vol. 106(8), pages 2046-2085, August.
    2. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," NBER Chapters, in: Investment in Human Beings, pages 9-49, National Bureau of Economic Research, Inc.
    3. Daniele Checchi & Gianfranco De Simone & Riccardo Faini, 2007. "Skilled Migration, FDI and Human Capital Investment," UNIMI - Research Papers in Economics, Business, and Statistics unimi-1067, Universitá degli Studi di Milano.
    4. Krugman, Paul & Elizondo, Raul Livas, 1996. "Trade policy and the Third World metropolis," Journal of Development Economics, Elsevier, vol. 49(1), pages 137-150, April.
    5. Binder, Melissa & Woodruff, Christopher, 2002. "Inequality and Intergenerational Mobility in Schooling: The Case of Mexico," Economic Development and Cultural Change, University of Chicago Press, vol. 50(2), pages 249-267, January.
    6. Nunnenkamp, Peter & Bremont, José Eduardo Alatorre, 2007. "FDI in Mexico: An empirical assessment of employment effects," Kiel Working Papers 1328, Kiel Institute for the World Economy (IfW Kiel).
    7. Moretti, Enrico, 2004. "Estimating the social return to higher education: evidence from longitudinal and repeated cross-sectional data," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 175-212.
    8. Gary S. Becker & Nigel Tomes, 1994. "Human Capital and the Rise and Fall of Families," NBER Chapters, in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, Third Edition, pages 257-298, National Bureau of Economic Research, Inc.
    9. Simona Iammarino & Philip McCann, 2013. "Multinationals and Economic Geography," Books, Edward Elgar Publishing, number 15181.
    10. Andrés Rodríguez‐Pose & Vassilis Tselios, 2009. "Education And Income Inequality In The Regions Of The European Union," Journal of Regional Science, Wiley Blackwell, vol. 49(3), pages 411-437, August.
    11. Wang, Jian-Ye & Blomstrom, Magnus, 1992. "Foreign investment and technology transfer : A simple model," European Economic Review, Elsevier, vol. 36(1), pages 137-155, January.
    12. David Abler & Jose S. Rodriguez & Héctor Robles, 1998. "The allocation of children's time in Mexico and Peru," Informes / Reports inf199801, Departamento de Economía - Pontificia Universidad Católica del Perú.
    13. Andreas Waldkirch & Peter Nunnenkamp & Jose Eduardo Alatorre Bremont, 2009. "Employment Effects of FDI in Mexico's Non-Maquiladora Manufacturing," Journal of Development Studies, Taylor & Francis Journals, vol. 45(7), pages 1165-1183, August.
    14. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-563, July.
    15. Richard Layard, 1999. "Economic Theories of Educational Planning (1972)," Palgrave Macmillan Books, in: Tackling Inequality, chapter 15, pages 283-309, Palgrave Macmillan.
    16. 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.
    17. Anne Le Brun & Susan R. Helper & David I. Levine, 2011. "The Effect of Industrialization on Children’s Education. The Experience of Mexico," Review of Economics and Institutions, Università di Perugia, vol. 2(2).
    18. Brian Aitken & Ann Harrison & Robert E. Lipsey, 2022. "Wages and foreign ownership A comparative study of Mexico, Venezuela, and the United States," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 4, pages 61-87, World Scientific Publishing Co. Pte. Ltd..
    19. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
    20. Braconier, Henrik & Norback, Pehr-Johan & Urban, Dieter, 2005. "Multinational enterprises and wage costs: vertical FDI revisited," Journal of International Economics, Elsevier, vol. 67(2), pages 446-470, December.
    21. Giuliani, Elisa & Pietrobelli, Carlo & Rabellotti, Roberta, 2005. "Upgrading in Global Value Chains: Lessons from Latin American Clusters," World Development, Elsevier, vol. 33(4), pages 549-573, April.
    22. Muhammad Asali & Adolfo Cristobal-Campoamor & Avner Shaked, 2016. "Local human capital formation and optimal FDI," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(5), pages 691-705, August.
    23. Slaughter, Matthew J., 2000. "Production transfer within multinational enterprises and American wages," Journal of International Economics, Elsevier, vol. 50(2), pages 449-472, April.
    24. Mejia, Daniel & St-Pierre, Marc, 2008. "Unequal opportunities and human capital formation," Journal of Development Economics, Elsevier, vol. 86(2), pages 395-413, June.
    25. Matthew J. Slaughter, 2004. "Skill Upgrading in Developing Countries: Has Inward Foreign Direct Investment Played a Role?," Palgrave Macmillan Books, in: William Milberg (ed.), Labor and the Globalization of Production, chapter 6, pages 121-145, Palgrave Macmillan.
    26. Oecd, 1999. "Educational Building and Decentralisation in Mexico," PEB Exchange, Programme on Educational Building 1999/2, OECD Publishing.
    27. Koji Miyamoto, 2003. "Human Capital Formation and Foreign Direct Investment in Developing Countries," OECD Development Centre Working Papers 211, OECD Publishing.
    28. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 367-397.
    29. Park, Kang H., 1996. "Educational expansion and educational inequality on income distribution," Economics of Education Review, Elsevier, vol. 15(1), pages 51-58, February.
    30. Orazio P. Attanasio, 2015. "The Determinants Of Human Capital Formation During The Early Years Of Life: Theory, Measurement, And Policies," Journal of the European Economic Association, European Economic Association, vol. 13(6), pages 949-997, December.
    31. Tharmmapornphilas, Rubkwan, 2013. "Impact of household factors on youth's school decisions in Thailand," Economics of Education Review, Elsevier, vol. 37(C), pages 258-272.
    32. Miao Wang & M. Wong, 2011. "FDI, Education, and Economic Growth: Quality Matters," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 39(2), pages 103-115, June.
    33. Federman Maya & Levine David I., 2005. "The Effects of Industrialization on Education and Youth Labor in Indonesia," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-34, February.
    34. Levison, Deborah & Moe, Karine S. & Marie Knaul, Felicia, 2001. "Youth Education and Work in Mexico," World Development, Elsevier, vol. 29(1), pages 167-188, January.
    35. Robert E. Lipsey, 2004. "Home- and Host-Country Effects of Foreign Direct Investment," NBER Chapters, in: Challenges to Globalization: Analyzing the Economics, pages 333-379, National Bureau of Economic Research, Inc.
    36. Robert E. B. Lucas & Donald Verry, 1999. "The Malaysian Education and Training Systems," Palgrave Macmillan Books, in: Restructuring the Malaysian Economy, chapter 0, pages 93-142, Palgrave Macmillan.
    37. Noria, Gabriela López, 2015. "The effect of trade and FDI on inter-industry wage differentials: The case of Mexico," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 381-397.
    38. Mazhar Mughal & Natalia Vechiu, 2011. "The role of Foreign Direct Investment in higher education in the developing countries (Does FDI promote education?)," Working papers of CATT hal-01885159, HAL.
    39. Joshua D. Angrist & Alan B. Keueger, 1991. "Does Compulsory School Attendance Affect Schooling and Earnings?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(4), pages 979-1014.
    40. Hartmut Egger & Peter Egger & Josef Falkinger & Volker Grossmann, 2010. "The Impact of Capital Market Integration on Educational Choice and the Consequences for Economic Growth," The World Economy, Wiley Blackwell, vol. 33(10), pages 1241-1268, October.
    41. Quinn, Michael A. & Rubb, Stephen, 2006. "Mexico's labor market: The importance of education-occupation matching on wages and productivity in developing countries," Economics of Education Review, Elsevier, vol. 25(2), pages 147-156, April.
    42. Birdsall, N., 1999. "Education: The People's Asset," Papers 5, Brookings Institution - Working Papers.
    43. Binelli, Chiara & Rubio-Codina, Marta, 2013. "The Returns to Private Education: Evidence from Mexico," Economics of Education Review, Elsevier, vol. 36(C), pages 198-215.
    44. Iammarino, Simona & Padilla-Pérez, Ramon & von Tunzelmann, Nick, 2008. "Technological Capabilities and Global-Local Interactions: The Electronics Industry in Two Mexican Regions," World Development, Elsevier, vol. 36(10), pages 1980-2003, October.
    45. Markusen, James R & Venables, Anthony J, 1997. "The Role of Multinational Firms in the Wage-Gap Debate," Review of International Economics, Wiley Blackwell, vol. 5(4), pages 435-451, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zaiyang Li & Hassan Swedy Lunku & Shaohua Yang & Agus Salim, 2024. "The dynamic interplay of foreign direct investment and education expenditure on Sub-Saharan Africa income inequality," International Economics and Economic Policy, Springer, vol. 21(3), pages 593-616, July.
    2. J. Eduardo Ibarra-Olivo & Thomas Neise & Moritz Breul & Jöran Wrana, 2024. "FDI and human capital development: a tale of two Southeast Asian economies," Journal of International Business Policy, Palgrave Macmillan, vol. 7(3), pages 314-336, September.
    3. Chengjuan Xia & Md. Qamruzzaman & Anass Hamadelneel Adow, 2022. "An Asymmetric Nexus: Remittance-Led Human Capital Development in the Top 10 Remittance-Receiving Countries: Are FDI and Gross Capital Formation Critical for a Road to Sustainability?," Sustainability, MDPI, vol. 14(6), pages 1-24, March.
    4. Tao Tang & Brayan Tillaguango & Rafael Alvarado & Ximena Songor-Jaramillo & Priscila Méndez & Stefania Pinzón, 2022. "Heterogeneity in the Causal Link between FDI, Globalization and Human Capital: New Empirical Evidence Using Threshold Regressions," Sustainability, MDPI, vol. 14(14), pages 1-27, July.
    5. Khadija Straaten & Rajneesh Narula & Elisa Giuliani, 2023. "The multinational enterprise, development, and the inequality of opportunities: A research agenda," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 54(9), pages 1623-1640, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. J. Eduardo Ibarra-Olivo & Thomas Neise & Moritz Breul & Jöran Wrana, 2024. "FDI and human capital development: a tale of two Southeast Asian economies," Journal of International Business Policy, Palgrave Macmillan, vol. 7(3), pages 314-336, September.
    2. J. Eduardo Ibarra‐Olivo & Andrés Rodríguez‐Pose, 2022. "FDI and the growing wage gap in Mexican municipalities," Papers in Regional Science, Wiley Blackwell, vol. 101(6), pages 1411-1439, December.
    3. Teixeira, Aurora A.C. & Tavares-Lehmann, Ana Teresa, 2014. "Human capital intensity in technology-based firms located in Portugal: Does foreign ownership matter?," Research Policy, Elsevier, vol. 43(4), pages 737-748.
    4. Ana Teresa Tavares & Aurora A. C. Teixeira, 2005. "Human Capital Intensity in Technology-Based Firms Located in Portugal: Do Foreign Multinationals Make a Difference?," FEP Working Papers 187, Universidade do Porto, Faculdade de Economia do Porto.
    5. an de Meulen, Philipp, 2011. "Labor Heterogeneity and the Risk of Expropriation in Less Developed Countries," Ruhr Economic Papers 298, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    6. Bandick, Roger & Hansson, Pär, 2005. "Inward FDI and demand for skills in Sweden," Working Papers 2005:10, Örebro University, School of Business.
    7. Paolo Figini & Holger Görg, 1999. "Multinational companies and wage inequality in the host country: The case of Ireland," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 135(4), pages 594-612, December.
    8. Giovanni S.F. Bruno & Rosario Crinò & Anna M. Falzoni, 2004. "Foreign Direct Investment, Wage Inequality, and Skilled Labor Demand in EU Accession Countries," KITeS Working Papers 154, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Feb 2004.
    9. Muhammad Asali & Adolfo Cristobal-Campoamor & Avner Shaked, 2016. "Local human capital formation and optimal FDI," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(5), pages 691-705, August.
    10. Philipp an de Meulen, 2011. "Labor Heterogeneity and the Risk of Expropriation in Less Developed Countries," Ruhr Economic Papers 0298, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    11. Roger Bandick & Pär Hansson, 2009. "Inward FDI and demand for skills in manufacturing firms in Sweden," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(1), pages 111-131, April.
    12. repec:zbw:rwirep:0298 is not listed on IDEAS
    13. David L. Carr & James R. Markusen & Keith E. Maskus, 2021. "Estimating The Knowledge-Capital Model of the Multinational Enterprise," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 5, pages 95-110, World Scientific Publishing Co. Pte. Ltd..
    14. Robert E. Lipsey, 2002. "Home and Host Country Effects of FDI," NBER Working Papers 9293, National Bureau of Economic Research, Inc.
    15. Robbins, Donald J., 2003. "The impact of trade liberalization upon inequality in developing countries : a review of theory and evidence," ILO Working Papers 993650553402676, International Labour Organization.
    16. Dierk Herzer & Philipp Hühne & Peter Nunnenkamp, 2014. "FDI and Income Inequality—Evidence from Latin American Economies," Review of Development Economics, Wiley Blackwell, vol. 18(4), pages 778-793, November.
    17. Joseph Francois & Douglas R. Nelson, 2000. "Victims of Progress: Economic Integration, Specialization, and Wages for Unskilled Labor," Tinbergen Institute Discussion Papers 00-065/2, Tinbergen Institute.
    18. David Hummels & Jakob R. Munch & Chong Xiang, 2018. "Offshoring and Labor Markets," Journal of Economic Literature, American Economic Association, vol. 56(3), pages 981-1028, September.
    19. Robert Feenstra & Gordon Hanson, 2001. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," NBER Working Papers 8372, National Bureau of Economic Research, Inc.
    20. Chiquiar, Daniel, 2008. "Globalization, regional wage differentials and the Stolper-Samuelson Theorem: Evidence from Mexico," Journal of International Economics, Elsevier, vol. 74(1), pages 70-93, January.
    21. Andrés Rodríguez-Pose & Vassilis Tselios, 2010. "Inequalities in income and education and regional economic growth in western Europe," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 44(2), pages 349-375, April.

    More about this item

    Keywords

    Foreign direct investment; Foreign wage premium; Returns to education; Educational outcomes; Human capital development; Mexico;
    All these keywords.

    JEL classification:

    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecoedu:v:82:y:2021:i:c:s027277572100042x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/econedurev .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.