Kiel Working Papers, Kiel Institute for World Economics
No 1806:
Does Aid for Education Attract Foreign Investors? An Empirical Analysis for Latin America
Julian Donaubauer, Dierk Herzer and Peter Nunnenkamp
Abstract: We address the question of whether foreign aid helps
attract foreign direct investment (FDI). This could be achieved if well
targeted aid removed critical impediments to higher FDI inflows. In
particular, test the hypothesis that aid for education is an effective
means to increase FDI flows to host countries in Latin America where
schooling and education appears to be inadequate from the viewpoint of
foreign investors. We employ panel data techniques covering 21 Latin
American countries over the period from 1984 to 2008. We find that aid for
education has a statistically significant positive effect on FDI. This
effect is robust to potential outliers, sample selection, alternative
specifications and different estimation methods
Keywords: foreign aid, foreign direct investment, aid effectiveness, human capital; (follow links to similar papers)
JEL-Codes: E24,; F21,; F35,; O15,; O19; (follow links to similar papers)
32 pages, November 2012
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