Gender Disparity in Education and the International Competition for FDI

With few exceptions, the empirical literature on foreign direct investment (FDI) continues to be gender-blind. This paper contributes to filling this gap by assessing the importance of gender inequality in education as a determinant of FDI. We estimate a standard gravity model on bilateral FDI flows which is augmented by educational variables, including different measures of gender inequality in education. The analysis covers an unprecedented number of both host and source countries of FDI, thereby reducing the risk of distorted results because of a sample selection bias. Our results clearly reject the view that foreign investors favor locations where education-related gender disparities may offer cost advantages. Rather, we find that gender disparity discourages FDI inflows. However, the strength of this relation depends on the level of education as well as on the destination and source of FDI flows. JEL Classification: F23, I21, J16