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Human capital threshold, foreign direct investment and economic growth: evidence from sub-Saharan Africa

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  • Friday Osemenshan Anetor

Abstract

Purpose - The purpose of this study is to analyze the mediating effect of human capital in foreign direct investment (FDI) and growth nexus and establish the threshold of human capital in 28 sub-Saharan African (SSA) countries over the period 1999–2017. Design/methodology/approach - This study used a secondary source of data obtained from the World Development Indicator and used the system generalized method of moments and dynamic panel threshold regression (TR) to analyze the data. Findings - This study found that FDI and human capital have no significant impact on the economic growth in SSA. However, when the interactive term of FDI and human capital was introduced in the model, the economic growth effect of FDI became positive and significant, while the coefficient of the interactive term is negative and significant. This presupposes that SSA does not have a sufficient high-quality workforce that can absorb and transform the spillover benefits of FDI into economic growth. As a result, this study applied the TR to determine the minimum level of human capital and established a threshold level at 63.91%. Practical implications - It, therefore, becomes pertinent for policymakers in the SSA region to have a human capital policy to build up their absorptive capacities to fully take advantage of FDI. Originality/value - The contribution of this study lies in establishing a threshold of human capital at 63.91% for countries in the SSA region.

Suggested Citation

  • Friday Osemenshan Anetor, 2020. "Human capital threshold, foreign direct investment and economic growth: evidence from sub-Saharan Africa," International Journal of Development Issues, Emerald Group Publishing Limited, vol. 19(3), pages 323-337, June.
    • Handle: RePEc:eme:ijdipp:ijdi-01-2020-0014
    DOI: 10.1108/IJDI-01-2020-0014
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    Citations

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    Cited by:

    1. Friday Osemenshan Anetor & Olusegun Vincent, . "Do human capital and institutional environment constrain the impact of foreign direct investment inflows on economic growth in Africa?," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    2. Imen Mohamed Sghaier, 2022. "Foreign Capital Inflows and Economic Growth in North African Countries: the Role of Human Capital," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(4), pages 2804-2821, December.
    3. Imen Mohamed Sghaier, 2021. "Foreign Financial Flows, Human Capital and Economic Growth in North African Countries," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 3, pages 355-371, September.
    4. Asafo-Agyei, George & Kodongo, Odongo, 2022. "Foreign direct investment and economic growth in Sub-Saharan Africa: A nonlinear analysis," Economic Systems, Elsevier, vol. 46(4).
    5. Kazeem Abimbola Sanusi & Forget Mingiri Kapingura, 2022. "Drivers of capital inflow: Does global uncertainty matter?," Cogent Business & Management, Taylor & Francis Journals, vol. 9(1), pages 2124596-212, December.
    6. Thanh Dinh Su & Canh Phuc Nguyen, 2022. "Foreign financial flows, human capital and economic growth in African developing countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3010-3031, July.

    More about this item

    Keywords

    Economic growth; Foreign direct investment; System GMM; SSA; Human capital threshold; F21; J24; O40; O55;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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