The impact of foreign direct investment on secondary school drop-out rates: an empirical approach from Brazilian municipalities data (2011-2019)

Abstract

How does inward Foreign Direct Investment (FDI) impact school drop-out rates? Current literature can not satisfactorily answer this question regarding Brazilian municipalities as the central unit of analysis. Previous works have focused on researching national-level data for all developing countries. However, different results may emerge while studying Brazil due to differences regarding the type of FDI that enters the country. As Multinational Enterprises (MNEs) in Brazil offer higher wages and employ more high-skilled workers than their national counterparts, I argue that inward FDI increases the incentives for students to stay in school as it increases the expected return for education. Thus, I expect that receiving foreign direct investment will decrease secondary school drop-out rates in Brazilian municipalities. To test this hypothesis, I employ fixed-effects models gathering relevant social and economic data for 5,568 Brazilian municipalities between 2011 and 2019. The results show that receiving FDI does not present statistical significance to explain secondary school drop-out rates. This present research offers new insights into studies centered on the local impacts of globalization.