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Does Human Capital Endowment of FDI Recipient Countries Really Matter? Evidence from Cross-Country Firm Level Data


  • Bhaumik, Sumon K.

    () (University of Sheffield)

  • Dimova, Ralitza

    () (University of Manchester)


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.

Suggested Citation

  • Bhaumik, Sumon K. & Dimova, Ralitza, 2012. "Does Human Capital Endowment of FDI Recipient Countries Really Matter? Evidence from Cross-Country Firm Level Data," IZA Discussion Papers 6382, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6382

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    References listed on IDEAS

    1. 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.
    2. Sumon Kumar Bhaumik & Ralitza Dimova, 2014. "Good and bad institutions: is the debate over? Cross-country firm-level evidence from the textile industry," Cambridge Journal of Economics, Oxford University Press, vol. 38(1), pages 109-126.
    3. 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.
    4. S. K. Bhaumik & S. Gangopadhyay & S. Krishnan, 2008. "Policy, economic federalism, and product market entry: the Indian experience," The European Journal of Development Research, Taylor and Francis Journals, vol. 20(1), pages 1-30.
    5. 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.
    6. 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 325-332.
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    More about this item


    multinational enterprises; human capital; training; firm-level efficiency;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development

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