Education and foreign direct investment: An empirical analysis of the case of Morocco

Abstract

The emergence of globalisation as the predominant configuration of the world economy has contributed to a reassessment of the place and role of foreign direct investment (FDI) in national economies. Many variables have been examined in the literature as determinants of FDI, with human capital being one of the most important determinants of inward FDI. It plays a vital and indispensable role in the process of economic growth, development and innovation by improving the social welfare of people. The relationship between FDI and human capital has become a subject of growing interest. The role of human capital in attracting foreign direct investment has been widely identified in the literature. In this paper the emphasis is on the importance of human capital as an explanatory variable that further drains foreign direct investment to our country. This paper studies the impact of human capital on the attraction of FDI in Morocco, by conducting a time series econometric study using the error correction model (ECM) over the period 1990-2019. We find that the human capital associated with graduates of regular academic institutions as well as the number of graduates of institutes and colleges appears insignificant. Moreover, even if the human capital associated with master and doctorate graduates is significant, its effect on the attractiveness of FDI in Morocco remains negative. While the number of graduates in vocational training has a positive impact on the attractiveness of FDI. These results suggest, moreover, that it is rather the graduates from professional training courses that seem to constitute a powerful engine of FDI attractiveness.

Classification JEL : C51, E22, F21, J24, I21

Paper type: Empirical research