The role of Foreign Direct Investment in higher education in the developing countries (Does FDI promote education?)

Mazhar Mughal (1) , Natalia Vechiu (1)

1 CATT - Centre d'Analyse Théorique et de Traitement des données économiques

This paper studies the impact of FDI inflows on higher education in developing countries for the period 1998-2008. A large panel of developing countries is analyzed using different econometric techniques and specifications. We find evidence of short-term negative effect of the FDI on tertiary education measured by school enrolment. The negative effect of FDI is confirmed for both secondary and tertiary education when measured as the adult population having acquired the level. Among other control variables, GDP, demographic growth and the services sector value added seem to have a significant impact on higher education. GDP and services value-added show the expected positive impact, while population growth appears to affect education enrollment and attainment negatively. The study highlights the need for considering the differential aspects of foreign investments’ nature and characteristics, rather than treating them as a cure-all pill for the developing countries’ development problem.

Keywords: FDI; Education; Human capital; Developing countries

Domains: Economics and Finance

Mazhar Mughal, Natalia Vechiu. The role of Foreign Direct Investment in higher education in the developing countries (Does FDI promote education?). 2011. ⟨hal-01885159⟩