Foreign direct investment and youth educational outcomes in Mexican municipalities |
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| Affiliation: | 1. University of California, Irvine;2. Purdue University;3. Boston University;4. University of Denver;1. Centre for Economic Performance (LSE) and VATT, Finland;2. Bank of Italy, Italy;2. ARC Centre of Excellence for Children and Families over the Life Course;3. Institute for the Study of Labor (IZA);1. School of Public Affairs, American University;2. School of Public Affairs and IZA, Arizona State University;3. School of Public Affairs, NBER, and IZA, American University |
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| Abstract: | Inward foreign direct investment (IFDI) has often been considered to play a prominent role in the development of human capital in the host economy by introducing a foreign wage premium into the labour market. However, extant evidence on IFDI labour market effects is inconclusive, especially in emerging economies. We investigate for the case of Mexico whether foreign wage premia have an effect on educational outcomes of young cohorts that were 15 years old at the time of IFDI arrival in their municipality of residence. Results suggest that increasing foreign wage premium for unskilled jobs, both in manufacturing and services, has negative effects on a cohort's subsequent educational outcomes. The effects of foreign wage premium for skilled workers, however, are not significant but may lead to positive educational outcomes. The long-term implications of losses accruing from low investment in human capital do not only affect individuals but regions as well. |
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