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Foreign Direct Investment and Human Capital: The Role of Political and Civil Rights

Journal of International Development, Forthcoming

19 Pages Posted: 4 Sep 2008 Last revised: 12 May 2011

Nabamita Dutta

University of Wisconsin - La Crosse

Kwasi Osei-Yeboah

affiliation not provided to SSRN

Date Written: June 16, 2010

Abstract

Domestic human capital is definitely a determinant of foreign direct investment (FDI) inflows for the developing world. Yet, the contribution of human capital will depend to a great extent on the institutional framework of a nation. Good political (civil) rights favor human capital to reap the benefits of FDI inflows more efficiently. Our paper show that the interlinkages between FDI, human capital and political (civil) rights play a very important role in explaining FDI inflows to developing countries. Using a panel of 76 developing countries, we show that human capital can have both linear and non-linear impact on FDI inflows. Unskilled human capital is always needed to attract FDI into a country and the linear positive association is enhanced by the presence of good political (civil) rights. Yet, skilled human capital may have both a concave and a convex association with FDI inflows, depending on the level of political (civil) rights of the country.

Keywords: Foreign Direct Investment, Human Capital, Political Right; Civil Right

JEL Classification: O15, O16, P48

Suggested Citation

Dutta, Nabamita and Osei-Yeboah, Kwasi, Foreign Direct Investment and Human Capital: The Role of Political and Civil Rights (June 16, 2010). Journal of International Development, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1263038

Nabamita Dutta (Contact Author)

University of Wisconsin - La Crosse ( email )

1725 State Street
La Crosse, WI 54601
United States

Kwasi Osei-Yeboah

affiliation not provided to SSRN ( email )

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