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Foreign Direct Investment and Country-Specific Human Capital

Author

Listed:
  • Jinyoung Kim

    () (Department of Economics, Korea University)

  • Jungsoo Park

    () (Department of Economics, Sogang University)

Abstract

Workers who are educated abroad acquire human capital specific to the country of foreign study (for example, language capital and country-specific knowledge on firm organization and on social system) which makes them more productive than domestically educated workers when both types of workers are employed by subsidiaries of multinational firms headquartered in the country of foreign study. An increase in foreign-educated labor in an FDI-host country thus attracts more FDI from the country of foreign study. We find evidence from bilateral FDI and foreign-student data for 63 countries over the period of 1963-1998 that strongly supports this prediction. Our findings suggest that foreign-educated labor may account for a sizable portion of growth in FDI flows during the sample period.

Suggested Citation

  • Jinyoung Kim & Jungsoo Park, 2007. "Foreign Direct Investment and Country-Specific Human Capital," Discussion Paper Series 0705, Institute of Economic Research, Korea University.
  • Handle: RePEc:iek:wpaper:0705
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    File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w0705.pdf
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    References listed on IDEAS

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    5. 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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    8. S. Lael Brainard, 1993. "A Simple Theory of Multinational Corporations and Trade with a Trade-Off Between Proximity and Concentration," NBER Working Papers 4269, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Shah, Mumtaz Hussain, 2016. "The Effect of Macroeconomic Stability on Inward FDI in African Developing Countries," MPRA Paper 82014, University Library of Munich, Germany.
    2. Mariya Neycheva, 2015. "Impact of Secondary and Tertiary Education on Economic Growth: a Co-integration Model for Bulgaria," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 82-106.
    3. Elisabetta Lodigiani & Luca Marchiori & I-Ling Shen, 2016. "Revisiting the Brain Drain Literature with Insights from a Dynamic General Equilibrium World Model," The World Economy, Wiley Blackwell, vol. 39(4), pages 557-573, April.
    4. repec:eaa:aeinde:v:17:y:2017:i:1_2 is not listed on IDEAS
    5. repec:kap:ecopln:v:50:y:2017:i:4:d:10.1007_s10644-016-9191-0 is not listed on IDEAS

    More about this item

    Keywords

    foreign direct investment; multinational firm; human capital; foreign education; students abroad;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F10 - International Economics - - Trade - - - General

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