Atlantic Economic Journal

, Volume 39, Issue 2, pp 103–115 | Cite as

FDI, Education, and Economic Growth: Quality Matters

  • Miao WangEmail author
  • M. C. Sunny Wong


In this paper, we revisit the results from the influential study by Borensztein et al. (Journal of International Economics 45:115–135, 1998), which argues that inward foreign direct investment (FDI) promotes the economic growth in a less developed host country only when the host country obtains a threshold level of secondary schooling. Borensztein et al. (Journal of International Economics 45:115–135, 1998) only focus on the quantity of education. We take into consideration both the quantity and the quality of education. We adjust the original schooling data in Borensztein et al. (Journal of International Economics 45:115–135, 1998) by two quality of education indices and re-estimate their model. We find that the complementarity between inward FDI and schooling still exists, but the threshold level of schooling in our study is lower than the threshold calculated in Borensztein et al. (Journal of International Economics 45:115–135, 1998). Our results support the importance of education quality and suggest that with improved quality of education, it does not take as much quantity of schooling, as established in Borensztein et al. (Journal of International Economics 45:115–135, 1998), for inward FDI to have a positive impact on economic growth in the host country.


FDI Schooling Quality of education Economic growth 




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Copyright information

© International Atlantic Economic Society 2011

Authors and Affiliations

  1. 1.Department of EconomicsMarquette UniversityMilwaukeeUSA
  2. 2.Department of EconomicsUniversity of San FranciscoSan FranciscoUSA

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