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Foreign direct investment and youth educational outcomes in Mexican municipalities

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  • 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
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    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

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