Labor Skills and Foreign Investment in a Dynamic Economy: Estimating the Knowledge‐Capital Model for Singapore

17 Pages Posted: 18 Oct 2013

See all articles by Gnanaraj Chellaraj

Gnanaraj Chellaraj

Ministry of Health, Singapore

Keith E. Maskus

University of Colorado at Boulder - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Aaditya Mattoo

World Bank - Development Research Group (DECRG)

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Date Written: November 2013

Abstract

Singapore is an interesting example of how the pattern of foreign investment changes with economic development. This paper studies inbound and outbound investment between Singapore and a sample of industrialized and developing countries over the period 1984–2007. Singapore's investments from industrialized nations shifted into skill‐seeking activities, while its investments in developing countries became concentrated in labor‐seeking production. The knowledge‐capital model is used to analyze the determinants of these shifts. The estimates suggest that a 10% increase in Singapore's skill differences with developing countries resulted in a 15.2% increase in outbound stocks of investment to the average recipient nation. A 10% decline in skill differences with industrialized countries after 1995 resulted in a 3.6% increase in inbound stocks from the average parent nation.

Suggested Citation

Chellaraj, Gnanaraj and Maskus, Keith E. and Mattoo, Aaditya, Labor Skills and Foreign Investment in a Dynamic Economy: Estimating the Knowledge‐Capital Model for Singapore (November 2013). Review of Development Economics, Vol. 17, Issue 4, pp. 627-643, 2013, Available at SSRN: https://ssrn.com/abstract=2341947 or http://dx.doi.org/10.1111/rode.12055

Gnanaraj Chellaraj (Contact Author)

Ministry of Health, Singapore ( email )

College of Medicine
16 College Road
Singapore, 169854
Singapore

Keith E. Maskus

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
303-492-7588 (Phone)
303-492-8960 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Aaditya Mattoo

World Bank - Development Research Group (DECRG) ( email )

1818 H Street, N.W.
Room MC 3-327
Washington, DC 20433
United States
202-458-8047 (Phone)
202-676-9810 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/amattoo

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