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FOREIGN DIRECT INVESTMENT AND COUNTRY-SPECIFIC HUMAN CAPITAL

Authors

  • JINYOUNG KIM,

    1. Kim: Professor, Department of Economics, Korea University, Anam-dong, Seongbuk-gu, Seoul 136-701, South Korea. Phone 82-2-3290-2202, Fax 82-2-928-4948, E-mail jinykim@korea.ac.kr
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  • JUNGSOO PARK

    1. Park: Professor, School of Economics, Sogang University, Shinsu-dong, Mapo-gu, Seoul 121-742, South Korea. Phone 82-2-705-8697, Fax 82-2-704-8599, E-mail jspark@sogang.ac.kr
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    • Jinyoung Kim acknowledges financial support through the National Research Foundation of Korea Grant funded by the Korean Government (NRF-2010-330-B00093). Jungsoo Park was supported by Sogang University Research Grant. We thank the editor, a referee, and participants in seminars at several universities for helpful comments. All errors are exclusively the responsibility of the authors.


Abstract

This paper exploits an international bilateral data set over the period 1963–1998 to investigate the relationship between foreign direct investment (FDI) and foreign-educated labor in an FDI host country. Workers educated abroad acquire country-specific human capital that is more productive in the host country of study. A foreign subsidiary sharing a parent firm's technology will invest more if it has more foreign-educated labor, since it can utilize this labor more productively because of the country-specific human capital. Consistent with our predictions, our empirical findings show that foreign-educated labor accounted for a sizable portion of growth in FDI flows. (JEL F21, F10)

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