Does Foreign Direct Investment Catalyze Local Structural Transformation and Human CapitalAccumulation? : Evidence from China / Yan Liu.

Format:

Book

Author/Creator:

Liu, Yan, author.

Series:

Policy research working papers.

Policy research working papers

Language:

English

Subjects (All):

Investments, Foreign--China.

Investments, Foreign.

Economic development.

Human capital.

Physical Description:

1 online resource (42 pages).

Place of Publication:

Washington, D.C. : The World Bank, 2022.

Summary:

This paper examines the effect of foreign direct investment on local structural transformation and human capital accumulation in China, exploiting variations in foreign direct investment inflows across manufacturing sub-sectors caused by China's foreign direct investment deregulation and initial sectoral composition patterns across China's cities and provinces. Using a panel of city-level data from 1990 to 2005, the paper shows that manufacturing foreign direct investment inflows greatly accelerated city-level structural transformation and human capital accumulation. By expanding access to the global market, foreign direct investment created a huge pull factor that drew excess labor away from farms into factories and services. Foreign direct investment has promoted high school and university enrollment by paying a higher wage premium for skilled workers and pushing up the skill premium. The positive effect on structural transformation is largely driven by export-oriented foreign direct investment, while market-seeking foreign direct investment has a much larger effect on college enrollment. High-skill foreign direct investment has a larger effect on college enrollment than low-skill foreign direct investment.

Notes:

Description based on publisher supplied metadata and other sources.

Publisher Number:

10.1596/1813-9450-9952