Foreign Direct Investment and Higher Education Development in Pakistan: Evidence from Structural Break Testing

This study investigates the relationship between foreign direct investment and higher education development in Pakistan by using the annual time series data from the period of 1972 to 2013. Results of autoregressive distributed lag-based coefficient model, fully modified ordinary least square method and dynamic ordinary least square method indicate that foreign direct investment has a positive and significant impact on higher education in long run and short run. Results of causality analysis suggest the unidirectional causal relationship of foreign direct investment and higher education development in Pakistan which runs from foreign direct investment to higher education development. It is concluded that foreign direct investment brings advanced technologies, which requires more skilled and managerial labour force. Similarly, the competition in labour market also increases with the entrance of foreign direct investment. Consequently, people go for higher studies to enhance their capabilities and to get the competitive edge in the labour market.