Foreign direct investment vs. Foreign portfolio investment with respect to human capital: the impact of education on the host OECD Countries

ABSTRACT

This paper describes an empirical investigation to provide a more accurate and detailed picture of the relationship between education and the two core forms of international investment: foreign direct investment (FDI) and foreign portfolio investment (FPI). We found that human capital related to education can lay a foundation with policy and strategy implications for host country governments and multinational corporations. The analysis focused on developed countries belonging to the OECD, from 1960 to 2010, and employed a series of education variables across the main educational levels. The empirical findings suggest that FDI is affected by the secondary and tertiary levels while FPI is affected only by the tertiary. Also, the Schooling and Completion Ratios appear to have a major impact on the flow of both FDI and FPI.

KEYWORDS:

• foreign direct investment
• foreign portfolio investment
• education
• OECD

JEL Classification:

• G15
• F23
• I28
• J24

Disclosure statement

No potential conflict of interest was reported by the author(s).