Skilled Labor: A Lever for Foreign Direct Investment Inflows?

Abstract

The aim of this study was to demonstrate the existence of a possible link between workforce quality and foreign direct investment inflows. We used a panel model to control for the heterogeneity of the observations in their individual dimensions, by considering a specific effect assumed to be certain. The results of this fixed-effects model show that FDI inflows are greater in countries where there is a movement of labor from low-productivity to high-productivity economic activities. This movement is possible when the labor force varies in qualitative intensity. It also emerges that an influx of FDI is linked to the ease of cross-border trade, which requires a focus on institutions, particularly those aspects that affect the expense, ease and reliability of doing business in a country.