OECD Development Centre Working Papers

The OECD Development Centre links OECD members with developing and emerging economies and fosters debate and discussion to seek creative policy solutions to emerging global issues and development challenges. This series of working papers is intended to disseminate the OECD Development Centre’s research findings rapidly among specialists in the field concerned. These papers are generally available in the original English or French, with a summary in the other language.

English, French

Government Policies for Inward Foreign Direct Investment in Developing Countries

Implications for Human Capital Formation and Income Inequality

This paper discusses policy options available to government policy makers in developing countries to attract foreign direct investment (FDI) and influence the behaviour of transnational corporations (TNCs), and it focuses on the effects these corporations have on human capital formation and income inequality in host countries. While the central role of human capital formation in development is increasingly recognised in the literature, less is known about the relationship between FDI and human capital formation and the questions whether and how policy should address this remain unanswered. This paper first reviews the effects of TNCs on human capital using a simple supply and demand framework of the market for skills. It then reviews different types of FDI policy and their effectiveness. Finally, it discusses how FDI policy may have affected the interaction between FDI and human capital formation in developing countries. The paper concludes with suggestions for further research ...


This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error