Foreign Direct Investment, Economic Growth, and the Human Capital Threshold: Evidence from US States.

The United States has experienced a dramatic increase in foreign direct investment (FDI) in recent years. While foreign firms bring immediate benefits of high-paying jobs, data limitations have prevented detailed study on FDI's long-term effects on the states receiving it. By creating a new stock measure of FDI based on employment, we are able to capture these long-term effects. Results demonstrate that FDI has a greater impact on per capita output growth than domestic investment for US states that meet a minimum human capital threshold. Ironically, the most active states in the recruitment of FDI tend to fall below this threshold. [ABSTRACT FROM AUTHOR]