Does Human Capital Endowment of Foreign Direct Investment Recipient Countries Really Matter? Evidence from Cross‐Country Firm Level Data

12 Pages Posted: 18 Jul 2013

See all articles by Sumon Kumar Bhaumik

Sumon Kumar Bhaumik

Aston University

Ralitza Dimova

University of Manchester - Institute for Development Policy and Management

Date Written: August 2013

Abstract

The stylized literature on foreign direct investment (FDI) suggests that developing countries should invest in the human capital of their labor force in order to attract FDI. 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 labor force. Using cross‐country data from the textiles and garments industry, we demonstrate that training indeed has a greater impact on firm efficiency in developing countries than formal education of the workforce.

Suggested Citation

Bhaumik, Sumon Kumar and Dimova, Ralitza, Does Human Capital Endowment of Foreign Direct Investment Recipient Countries Really Matter? Evidence from Cross‐Country Firm Level Data (August 2013). Review of Development Economics - Special Issue. Guest Editor: Zhihao Yu, Vol. 17, Issue 3, pp. 559-570, 2013, Available at SSRN: https://ssrn.com/abstract=2295283 or http://dx.doi.org/10.1111/rode.12050

Ralitza Dimova

University of Manchester - Institute for Development Policy and Management ( email )

Manchester
United Kingdom

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