Skill Upgrading in Developing Countries: Has Inward Foreign Direct Investment Played a Role?

How do multinational firms affect both the demand for and supply of skills in hostcountry labor markets? On the demand side, inward can FDI stimulate demand for moreskilled workers in host countries through several channels. Most empirical evidence is that these channels work mainly within multinationals themselves, rather than through knowledge spillovers to domestic firms. On the supply side, the question of how inward FDI influences the development of human capital is much less clear. There are two different modes by which MNEs can facilitate investments in human capital. One is the short-term, firm-level activities by which individual firms interact with host-country labor markets. The other is long-term, country-level activities by which MNEs collectively contribute to the overall macro environment in which fiscal policy drives education policy.