FDI and economic vulnerability: The role of local human capital

This study explores how the impact of Foreign Direct Investment (FDI) on economic vulnerability is influenced by the level of local human capital. Using global data from 2000 to 2018, our analysis finds that higher levels of local human capital are associated with lower economic vulnerability when FDI inflows increase. This indicates that a more educated and skilled workforce enhances a country’s ability to effectively utilize FDI, thereby reducing susceptibility to external economic shocks. However, the impact of human capital varies over time. The effect is not significant from 2000 to 2009, but becomes pronounced from 2010 to 2018. This suggests that the role of human capital in reducing economic vulnerability in the context of FDI has become more important in recent years.