An Empirical Investigation of FDI and Higher Education in Sub Saharan Africa
Sheereen Fauzel, Boopen Seetanah, and R. V. Sannassee
University of Mauritius, Mauritius
Volume 12: 2017, pp. 29-48; ABSTRACT
Foreign direct investment (FDI) in Sub Saharan Africa has become a key component for economic development. More importantly, the spillovers effect of FDI is considered as crucial to the development of the economy of host countries. The benefits from FDI are mainly in terms of technology, technical and managerial skills. With foreign investment, there is greater demand for skilled labour in the host countries which creates incentives to the local population to seek higher education and be able to secure skilled jobs. The motivation for this investigation comes from the mixed results obtained on the FDI-Higher education spillover. Based on the panel vector autoregressive model (PVAR) and panel vector error correction model (PVECM) method, this empirical study investigates whether any links exist between FDI and higher education in a selected group of 20 Sub Saharan African countries during the years 1990-2014. In both the long run and short run, a positive and direct relationship was found between foreign investment and higher education. Furthermore, economic performance and trade openness is seen to be a key determinant of higher education. However, population growth is seen to discourage individuals to seek higher education. Also, an indirect effect of FDI on higher education in the short run via the economic growth channel is observed. In addition to that, it is observed that there is a bi directional causality between FDI and higher education. Finally the Generalised Response Function depict that log of higher education is responsive to a shock to the log of foreign direct investment.
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