IDEAS home Printed from
   My bibliography  Save this paper

Local human capital formation and optimal FDI


  • Muhammad Asali

    (Tbilisi State University)

  • Adolfo Cristóbal

    (Universidad Loyola Andalucía)

  • Avner Shaked

    (University of Bonn)


This paper lends both theoretical and empirical support to the notion of optimal FDI levels. It does so by uncovering an inverted-U-shaped relationship between FDI and human capital formation. The optimality of a particular FDI inflow depends on the educational incentives induced by FDI on the local, heterogeneous population. Our estimates confirm the significance of a positive (linear) and a negative (non-linear) impact of FDI stocks on tertiary schooling, which are exclusively relevant in developing countries.

Suggested Citation

  • Muhammad Asali & Adolfo Cristóbal & Avner Shaked, 2015. "Local human capital formation and optimal FDI," Working Papers 2015-002, Universidad Loyola Andalucía, Department of Economics.
  • Handle: RePEc:loy:wpaper:2015-002

    Download full text from publisher

    File URL:
    File Function: First version, 2015
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Michel Beine & Fréderic Docquier & Hillel Rapoport, 2008. "Brain Drain and Human Capital Formation in Developing Countries: Winners and Losers," Economic Journal, Royal Economic Society, vol. 118(528), pages 631-652, April.
    2. Frédéric Docquier & Hillel Rapoport, 2012. "Globalization, Brain Drain, and Development," Journal of Economic Literature, American Economic Association, vol. 50(3), pages 681-730, September.
    3. Dexter Gittens, . "The Effects of Foreign Direct Investment on the Accumulation of Human Capital in Developing Countries: Are There Implications for Future Growth?," Fordham Economics Dissertations, Fordham University, Department of Economics, number 2006.3.
    4. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, March.
    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.
    6. Jo Thori Lind & Halvor Mehlum, 2010. "With or Without U? The Appropriate Test for a U-Shaped Relationship," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(1), pages 109-118, February.
    7. Eicher, T-S & Kalaitzidakis, P, 1997. "The Human Capital Dimension to Foreign Direct Investment : Training, Adverse Selection and Firm Location," Discussion Papers in Economics at the University of Washington 97-03, Department of Economics at the University of Washington.
    8. 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.
    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. Michele Boldrin, 1991. "Threshold Externalities and Economic Development: A Note," Discussion Papers 953, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    Full references (including those not matched with items on IDEAS)


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

    Cited by:

    1. 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.
    2. Muhammad Asali & Norberto Pignatti & Sophiko Skhirtladze, 2017. "Employment Discrimination in Georgia: Evidence from a Field Experiment," Working Papers 004-17 JEL Codes: J15, J7, International School of Economics at TSU, Tbilisi, Republic of Georgia.
    3. Adolfo Cristobal Campoamor, 2015. "Job competition, employability and incentives for human capital formation," Economics Bulletin, AccessEcon, vol. 35(1), pages 550-560.

    More about this item


    FDI; Human Capital; Skills; Asymmetric Information.;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity


    Access and download statistics


    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:loy:wpaper:2015-002. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Departament of Economics). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.