Human Capital and FDI Inflows to Developing Countries: New Empirical Evidence |
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Affiliation: | 1. Southampton Solent Business School, Southampton Solent University, Sir James Matthews Building, Southampton SO14 0YN, UK;2. Bournemouth University, 189 Holdenhurst Road, Bournemouth BH8 8EB, UK;3. University of Stellenbosch, South Africa;1. University of Canterbury, New Zealand;2. Zhongnan University of Economics and Law, China;1. University of Cantabria, Department of Economics, Santander, Spain;2. University of Limerick, Kemmy Business School, Limerick, Ireland |
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Abstract: | Despite the dramatic increase in total foreign direct investment (FDI) flows to developing countries in the last few years, the bulk of the inflows has been directed to only a limited number of countries. It has been argued that developing countries might enhance their attractiveness as locations for FDI by pursuing policies that raise the level of local skills and build up human resource capabilities. Nevertheless, the empirical evidence in the literature in support of this recommendation for a large sample of developing countries is scant. This paper evaluates this argument in the light of the evolution in the structural characteristics of FDI and empirically tests the hypothesis that the level of human capital in host countries may affect the geographical distribution of FDI. The empirical findings are: (a) human capital is a statistically significant determinant of FDI inflows; (b) human capital is one of the most important determinants; and (c) its importance has become increasingly greater through time. |
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