The Impacts of Expenses for Population Health and Education of Human Resources on the Inflow of Foreign Direct Investments to Selected Islamic Country Members of MENA

اقتصاد پولی مالی

Article 2, Volume 25, Issue 15, May 2018, Pages 201-218

Document Type: پژوهشی

DOI: 10.22067/pm.v25i16.62871

Authors

hatef hazeri^{* 1}; naser sayfolahi²

¹mohaghegh ardebili

²Mohagagh Ardabili

Abstract

Introduction

Nowadays, foreign direct investment (FDI) is one of the best and most prominent methods in the area of financing investment projects. In addition to financing, employing this type of investment follows other purposes such as improving technology, developing skills and management for refining the qualitative abilities of domestic work force, developing export markets, increasing the standards of domestic productions and moving towards the global market economy. In other words, foreign direct investments enables domestic enterprises to have more access to the global markets as well as facilitating technology transfer (Dargahi, 2006).
Alongside the role and significance of foreign direct investments, many policy makers along with economic organizations and institutions have asserted the importance of population health and forming a human capital, especially in the developing countries during recent years. In this regard, much emphasis has been placed on the development of population health and forming human capital as one of the effective factors in increasing the tendencies of countries toward attracting private investments, both foreign and domestic. Furthermore, the World Health Organization (WHO) acknowledged healthy work force as one of the most significant effective factors in human capital as well as attracting foreign direct investments (The Commission on Macroeconomics and Health, 2010).

Theoretical Framework

There are a number of reasons concerning the role and impact of population health in attracting FDI. In general, a high level of healthcare alongside other factors would increase a country’s ability to attract foreign direct investments; in return, death and disease due to weak healthcare lead to an increase in production expenses followed by a decrease in the inflow of foreign direct investment. In other words, healthcare is an inseparable part of human capital, the reinforcement of which would increase the productivity of work force along with the escalation of economic growth (Celine and Desbordes, 2009).
Macroeconomic analyses through measuring anthropometric indices (including nutrition status, height, etc.) and disease indices (such as the number of days missed by a worker due to illness) have shown that healthcare impacts the productivity of workers (Ribero, 2008). By developing productivity, health-related expenses along with improving the individuals’ health in a society can increase the level of production followed by enhancing the country’s capability to attract foreign direct investments (Bleakley, 2010).
In addition to the role and significance of healthcare as a consumer product, improving health-related conditions of the work force as a particular form of human capital can directly increase economic efficiency at individual level and ultimately, in the society (Azam, 2015). This is due to the fact that a work force with a proper health condition is at a better state in terms of physical, spiritual, and productivity aspects, compared to an unhealthy work force. In return, weak healthcare results in the reduction of productivity and consequently, low incomes which would eventually lead to improper nutrition and health state. Bhargava, Jamison and Murray (2001) concluded that economic growth and attracting foreign direct investments caused by improving healthcare conditions have majorly occurred in developing countries compared to industrial ones.
 

Method

The present inquiry is a descriptive study. Descriptive studies entail a set of methods with the purpose of describing certain conditions or phenomena. The purpose of the present research is applied, as the aim of such studies are to gain the required understanding or knowledge so as to determine the tools, through which a certain, known necessity can be mitigated.
Main Hypothesis

Increasing the expenses for population health and education of human resources has a significant impact on the inflow of foreign direct investments.

Secondary Hypotheses

The market size (income per capita) has a significant impact on the inflow of foreign direct investments.
The degree of trade freedom has a significant relationship with the inflow of direct investments.

4-Results & Discussion
According to the results, the estimation regression model is not false, and all variables are expected and consistent with theoretical foundations. The coefficient of determination of the fitted model indicates that 86% of the direct foreign investment inflow to the Islamic countries of the MENA country is explained by three variables: market size (per capita income), health and education expenditures, and the degree of trade liberalization. Based on table results, the estimated coefficients of these variables are positive and significant at the 90% confidence level. As the increase in each of the variables Per capita income, the share of health and education expenditures on GDP and the degree of trade liberalization, have led to an increase in FDI inflows into the studied countries.

Conclusion and Suggestions

The results obtained from the goodness of model show that the portion of expenses for healthcare from gross domestic production alongside education is an important parameter concerning the extent of inflow of foreign direct investments to the Islamic country members of MENA. In fact, improving healthcare and education and the development of human capital in general, through enhancing the productivity of the work force, reducing investment risks, and offering high-level skills to the work force along with indirect impacts such as providing desirable social conditions lead to more attraction of foreign investments in Islamic country members of MENA. Furthermore, increasing GDP per capita as a result of enhancing capabilities to attract foreign investment flows and expanding market capacity can increase the inflow of FDI. Additionally, increasing the trade share gained form gross domestic production caused by domestic products and moving towards global market economy can play a role of utmost importance in offering positive trade impacts on foreign direct investments. As a result, it is recommended that in order to attract more foreign investments, a human resource development policy can be incorporated which may entail population health and educational policies along with other attraction strategies.

Keywords

Key words: Vertical Foreign Direct Investment; Population Health; Human resource; Islamic MENA Countries

References

[1] Asiedu, E. (2002). "On the determinants of foreign direct investment to developing countries: is Africa different?" world development, report No. 30(1): 107-119.

[2] Azam, M., Ather, M.A. (2015). Role of human capital and foreign direct investment in promoting economic growth: evidence from commonwealth of independent states, International Journal of Social Economics, 42 (2), pp. 98-111.

[3] Bhargava, A. (2001)."Nutrition, health and economic development: some policy priorities". commission on macroeconomics and health working paper series WGI: 14, world health organization.

[4] Bhargava, A. Jamison, D., Lau, L., and Murray, C. (2001). "Modeling the effects of health on economic growth", Journal of Health Economic, Report No. 20(3):423-440.

[5] Bleakley. H, (2010). Health, human capital, and development, university of chicago.

[6] Blomstrom, M. and Kokko, K, (2011). "Human capital and inward FDI", center for economic and policy research, London, working paper No.167.

[7] Bloom, D. E. (2005)."Education and public health: mutual challenges worldwide", comparative education review, Report No. 49(4): 437-451.

[8] Bloom, D. E., Canning, D., and Jamison, D. (2004). "Health, wealth and welfare". finance and development, Report No. 41(1):10-15.

[9] Celine. A and Rodolphe. D. (2009). "Public governance, health and foreign direct investment in Sub-Saharan Africa", Oxford Journals, Social Sciences, Journal of African Economies, Volume 18, Report No. 4: 667-709.

[10] Chakrabarti, A. (2001)0 "The determinants of foreign Direct Investment: Sensitivity of Cross-Country Regression". Kyklos, Report No. 54(1): 89-114.

[11] Dargahi. H. (2006)0 "Factors affecting foreign direct investment: lessons for Iran economic", Quarterly Journal of Sharif University, Report No. 36: 57-73. (In Persian).

[12] Hoseinibalam. A. (2007)0 Evaluation of the impact of FDI on economic growth in OIC member states, master's thesis in economics, university of Isfahan. (In Persian).

[13] Gyimah-Brempong, K., Asiedu, E. (2015). Remittances and investment in education: evidence from Ghana, Journal of International Trade & Economic Development, 24 (2), pp. 173-200.

[14] Liu, Q. and Qiu, L. D. (2014). “Labor training and foreign direct investment”, Review of International Economics, 22(1)0 pp.151–166. doi: 10.1111/roie.12102.

[15] Muhammad. T and Eatzaz. A. (2008)0 "Human capital development and FDI in developing countries", Journal of Economics Cooperation, Report No.29: 79-104.

[16] Mukherjee A. (2011)0 “Regional inequality in foreign direct Investment Flows to India: The Problem and the Prospects”, Reserve bank of India occasional papers, Vol. 32( 2)

[17] Riberio, R. (2008)0 "Earnings effects of household investment in health in Colombia", discussion paper No.810, economic growth center, Yale University, New Haven, CT.

[18] Shaha-Abadi. A, Mahmoudi. A. (2006).,"Determinants of foreign direct investment in Iran", Quarterly Journal of Jastarhaye Eghtesadi, Report No. 5: 89-126. (In Persian).

[19] Sahu, P. (2010). „FDI, Wage inequality and employment in emerging economies: recent evidence from Indian manufacturing‟, MPRA paper. UNCTAD, United Nations Conference on Trade and Development, (2004-2009(, World Investment Report, United Nations, New York.

[20] 20.Sehrawat, M., Giri, A.K. (2014). The relationship between financial development indicators and human development in India, International Journal of Social Economics, 41 (12), pp. 1194-1208.

[21] 21.Yildirim, D.C., Tosuner, O. (2014). The effects of FDI on human capital stock in Central Asian Turkic Republics, Eurasian Journal of Business and Economics, 7 (14), pp. 51-60.