The Effects of Foreign Direct Investment on Human Development

Abstract

Various studies in the past have examined the effect of foreign direct investment on economic growth of both developed and developing countries. However, research on the influence of foreign direct investment on an expanded conception of socio-economic progress such as human development is absent. In this article, we examine the effect of foreign direct investment on human development (measured by the human development index) for middle and low-income countries for the period from 1975 to 1999 to fill in this lacuna. Regression results of a fixed effects model indicate a positive effect of foreign direct investment on human development for both the groups of countries.