To fully benefit from the positive FDI spillovers not captured by any agents in the economy, countries should implement policies that help enhance such spillovers as well as those designed to attract FDI.Results from this paper suggest that a well-functioning labor market where labor mobility is undeterred and incentives for human capital accumulation are ample is essential for the transfer of technology and management expertise from foreign firms to domestic firms.Thus policies and reforms aimed at building efficient labor market institutions will have the additional benefit of enhancing FDI spillovers.