FDI and educational outcomes in developing countries

Abstract

This study explores the effects of foreign direct investment (FDI) inflows on educational outcomes in developing countries. FDI might affect education in host countries through different channels, but this topic has not been systematically studied. Using data from 80 developing countries over 1980–2014, we find that inward FDI promotes primary school enrollment and completion rates for boys and girls. In contrast, inward FDI has no significant impact on male secondary and tertiary enrollment, but a significantly negative effect on female secondary and tertiary enrollment. We also find that FDI from OECD countries promotes secondary and tertiary enrollment rates while non-OECD FDI does not, which can result from the larger spillovers of OECD FDI due to higher R&D content. In addition, considerable heterogeneity exists in the effect of FDI on educational outcomes across various host regions, which might be related to the different sectoral distribution of FDI in these host regions.