FOREIGN DIRECT INVESTMENT AND INCOME INEQUALITY: HUMAN CAPITAL MATTERS

2013 ◽  
Vol 53 (5) ◽  
pp. 874-896 ◽  
Author(s):  
Shu-Chin Lin ◽  
Dong-Hyeon Kim ◽  
Yi-Chen Wu
Keyword(s):  
Human Capital ◽  
Foreign Direct Investment ◽  
Income Inequality ◽  
Direct Investment

Is the Ukrainian economy’s absorptive capacity appropriate to attract foreign direct investment and facilitate economic growth?

2018 ◽  
Vol 13 (6) ◽  
pp. 1928-1947
Author(s):  
Svitlana Shevelova ◽  
Svitlana Plaskon
Keyword(s):  
Higher Education ◽  
Economic Growth ◽  
Human Capital ◽  
Foreign Direct Investment ◽  
Production Function ◽  
Transition Economies ◽  
Absorptive Capacity ◽  
Direct Investment ◽  
Content Type ◽  
Douglas Production Function

Purpose Despite an increasing volume of literature focussed on foreign direct investment (FDI) in transition economies, there has been little research into FDI in Ukraine. The relationship between the inflows of FDI (IFDI) and absorptive capacity (AC) has been under-researched in the peripheral transition countries like Ukraine. The purpose of this paper is to analyse the appropriateness of the Ukrainian economy’s AC to attract IFDI and facilitate economic growth with a particular focus on AC factors, such as the potential of human resources to absorb innovation and benefit from research and development (R&D) expenditure. Design/methodology/approach This study presents a thoughtful research design: there is an analysis of the AC framework for justification and selection factors that allows a measurement of the potential of Ukraine’s AC to attract and exploit IFDI. The study uses data from 25 regions in Ukraine for the 1996–2015 period. To estimate the effects of IFDI on Ukrainian economic growth, a Cobb–Douglas production function is used. As an appropriate instrumentation technique for dynamic panel data, the Generalised Method of Moments is used to provide unbiased and efficient estimates of the results. The application of the interactive term in this study allows the authors to indicate the existence of complementarities between IFDI and human capital, in particular with higher education, that afford opportunity to absorb new technologies and benefit from IFDI. Findings The resulting model indicates that R&D expenditure benefited very significantly in evolving country’s innovation system due to economic growth. Physical and human capital has not been used effectively in Ukraine to facilitate economic growth and attract IFDI. The number of patents is not significant in all of the regression models. Moreover, IFDI in Ukraine for the 1996–2015 period did not significantly impact on economic growth. However, the AC of human capital, in particular those with a higher education, is relatively relevant to benefit from IFDI. Practical implications The findings have important implications for governmental policy, which should be based on improving the business climate, a strategy for digital development, innovation, migration, institutional and regional policies aimed at the achievement of country’s sustainable economic growth. The government should increase R&D expenditure as an important factor of gross domestic product growth and introduce grants, loans and other financial supports for encouraging students to continue university education. Originality/value The originality and value of this paper is empirical and methodological. The empirical results of this study enable a conclusion about the appropriate level of the country’s absorptive capability required to benefit from IFDI. The paper also contributes to the existing academic debate and proves that despite the well-established theoretical framework for the IFDI–AC economic impact context, a new theorisation is needed to explore the full complexity of the country’s explicit relationship between AC and IFDI. Future research should be focussed on examining not only groups of countries but also distinctly the country’s explicit relationship between AC and IFDI with the particular attention for the under-researched countries: the peripheral transition economies to discover new research niches for theory building. This study presents an original methodological approach with a careful justification of the theoretical framework for hypothesis development, an appropriate sample and an original application of seminal research methods based on the Cobb–Douglas production function. This study proves that the interactive term, which allows indication of the existence of complementarities between IFDI and other variables, is appropriate for measuring AC in countries with smaller amounts of IFDI.

scholarly journals The Dynamics of Foreign Direct Investment in BRICS Countries

2017 ◽  
Vol 9 (3(J)) ◽  
pp. 101-112
Author(s):  
Kunofiwa Tsaurai
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Foreign Direct Investment ◽  
Financial Development ◽  
Direct Investment ◽  
Fixed Effects ◽  
Trade Openness ◽  
Human Capital Development ◽  
Brics Countries ◽  
Capital Development

Recent studies which investigated the determinants of foreign direct investment (FDI) in BRICS include Hsin-Hong and Shou-Ronne (2012), Nandi (2012), Jadhav (2012), Darzini and Amirmojahedi (2013), Nischith (2013), Ho et al. (2013), Kaur et al. (2013) and Priya and Archana (2014). The findings from these studies shows lack of consensus and confirm that a list of agreeable determinants of FDI in BRICS countries is still an unsettled matter. This paper was therefore initiated in order to contribute to the debate on the discourse on FDI determinants in BRICS countries.This paper deviates from earlier similar studies in five ways: (1) uses most recent data, (2) is the first to investigate whether a combination of financial development, trade openness, human capital, economic growth and inflation influence FDI in BRICS countries, (3) uses different proxies of the variables that affect FDI, (4) employed both fixed effects and pooled ordinary least squares (OLS) approaches and (5) used a stacked data approach.The results of the study showed that economic growth, trade openness and exchange rate stability positively impacted on FDI, financial development positively influenced FDI under fixed effects, FDI was positively influenced by human capital development using the pooled OLS and inflation negatively affected FDI in line with literature. Taking into account these findings, this study urges BRICS to implement policies that increase financial sector efficiency and economic growth, maintain stable exchange rates, keep inflation rates at lower levels, enhance trade openness and human capital development in order to increase FDI inflows.

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