Education Systems and Foreign Direct Investment: Does External Efficiency Matter?

By Elise Wendlassida Miningou, Sampawende J Tapsoba

March 30, 2017

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Elise Wendlassida Miningou, and Sampawende J Tapsoba. Education Systems and Foreign Direct Investment: Does External Efficiency Matter?, (USA: International Monetary Fund, 2017) accessed September 20, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper examines the effect of the efficiency of the education system on Foreign Direct Investment (FDI). First, it focuses on the external efficiency and applies a frontier-based measure as a proxy of the ability of countries to optimally convert the average years of schooling into income for individuals. Second, it shows the relationship between the external efficiency of the education system and FDI inflows by applying GMM regression technique. The results show that the efficiency level varies across regions and countries and appears to be driven by higher education and secondary vocational education. Similarly to other studies in the literature, there is no significant relationship between the average years of schooling and FDI inflows. However, this study shows that the external efficiency of the education system is important for FDI inflows. Improving the external efficiency of the education system can play a role in attracting FDI especially in non-resource rich countries, nonlandloked countries and countries in the low and medium human development groups.

Subject: Balance of payments, Education, Foreign direct investment, Human capital, Labor, Labor markets, National accounts, Personal income

Keywords: East Africa, Education System, Efficiency of the education system, External Efficiency, FDI, FDI attractiveness, FDI data, FDI determinant, FDI flow, FDI inflow, Foreign direct investment, Human Capital, Interest rate, Labor market, Labor markets, Middle East, North Africa, Personal income, South Asia, Standard deviation, Sub-Saharan Africa, WP

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/079
Stock No:

WPIEA2017079
ISBN:

9781475590234
ISSN:

1018-5941

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