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FDI, Education, and Economic Growth: Quality Matters

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  • Miao Wang

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  • M. Wong

Abstract

In this paper, we revisit the results from the influential study by Borensztein et al. (Journal of International Economics 45:115–135, 1998 ), which argues that inward foreign direct investment (FDI) promotes the economic growth in a less developed host country only when the host country obtains a threshold level of secondary schooling. Borensztein et al. (Journal of International Economics 45:115–135, 1998 ) only focus on the quantity of education. We take into consideration both the quantity and the quality of education. We adjust the original schooling data in Borensztein et al. (Journal of International Economics 45:115–135, 1998 ) by two quality of education indices and re-estimate their model. We find that the complementarity between inward FDI and schooling still exists, but the threshold level of schooling in our study is lower than the threshold calculated in Borensztein et al. (Journal of International Economics 45:115–135, 1998 ). Our results support the importance of education quality and suggest that with improved quality of education, it does not take as much quantity of schooling, as established in Borensztein et al. (Journal of International Economics 45:115–135, 1998 ), for inward FDI to have a positive impact on economic growth in the host country. Copyright International Atlantic Economic Society 2011

Suggested Citation

  • 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.
  • Handle: RePEc:kap:atlecj:v:39:y:2011:i:2:p:103-115
    DOI: 10.1007/s11293-011-9268-0
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    References listed on IDEAS

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    1. Jong Il Choe, 2003. "Do Foreign Direct Investment and Gross Domestic Investment Promote Economic Growth?," Review of Development Economics, Wiley Blackwell, vol. 7(1), pages 44-57, February.
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    Cited by:

    1. Muhammad Ali & Uwe Cantner & Ipsita Roy, 2016. "Knowledge spillovers through FDI and trade: the moderating role of quality-adjusted human capital," Journal of Evolutionary Economics, Springer, vol. 26(4), pages 837-868, October.

    More about this item

    Keywords

    FDI; Schooling; Quality of education; Economic growth; F20;

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General

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