Human Capital Development and Its Influence on FDI Withdrawal:An Empirical Analysis

This paper examines the causal effect of human capital expansion on the exit of foreignowned firms using the difference-in-differences method together with a quasi-natural experiment involving the expansion of higher education in China in 1999.The expansion of human capital reduces the probability of the exit of foreign-owned firms significantly This conclusion remains robust under a series of tests,including changing the sample range,adjusting the identification method,and considering the trade liberalization.Analysis of the mechanism indicates that human capital expansion reduces the exit probability of foreign-owned firms by stimulating innovation,improving production efficiency,and optimizing the quality of input and output goods.Industries with higher asset specificity are also more likely to restrain the exit of foreign-owned firms through human capital expansion.Overall,the findings of this study provide a good insight into the exit behavior of FDI in China from the perspective of human capital.