The Role Of Foreign Direct Investment In Human Capital Formation In Developing Countries: An Empirical Analysis
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Globalization has allowed a movement of various types of capital across countries including foreign direct investment (FDI). The Third World has experienced massive inflows of FDI since 1990, which resulted in a multitude of studies seeking to demonstrate the link between FDI, economic growth, technology transfer to local firms, and human capital enhancement in developing countries. This study focuses on the impact of FDI on human capital formation in developing countries. It uses an empirical approach to determine the impact of FDI on human capital accumulation in 103 developing countries. Enrollments at primary, secondary, and tertiary school levels were used as a proxy for human capital. The result shows that FDI affects positively enrollments at primary and secondary school levels, which implies that FDI enhances the level of human capital in developing countries.