Elise Wendlassida Miningou, and Sampawende Tapsoba
INTERNATIONAL MONETARY FUND
This paper examines the effect of the efficiency of the education system on Foreign Direct
Investment (FDI). First, it focuses on the external efficiency and applies a frontier-based
measure as a proxy of the ability of countries to optimally convert the average years of
schooling into income for individuals. Second, it shows the relationship between the external
efficiency of the education system and FDI inflows by applying GMM regression technique.
The results show that the efficiency level varies across regions and countries and appears to
be driven by higher education and secondary vocational education. Similarly to other studies
in the literature, there is no significant relationship between the average years of schooling
and FDI inflows. However, this study shows that the external efficiency of the education
system is important for FDI inflows. Improving the external efficiency of the education
system can play a role in attracting FDI especially in non-resource rich countries, nonlandloked
countries and countries in the low and medium human development groups.