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The Impact of Human Capital and Foreign Direct Investment on Economic Growth: An Empirical Study on Jordan

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  • Mustafa Mohammad Alalawneh

Abstract

Human capital is a real factor in improving the investment climate and attracting foreign investment. FDI also increases human capital in the host country through the transfer of advanced technology and the rehabilitation of local labor. The importance of the study comes from Jordan's serious endeavor to attract foreign direct investment and to present itself as a rich country in human and qualified capacities. This study examines the effect of human capital and foreign direct investment on economic growth in Jordan employing Auto Regressive Distributed Lags Bounds Testing (ARDL BT) co-integration method for the spanning period from 1984 to 2018. The results indicate that there is a long- run relationship among variables. The results showed that there is a negative and statistically significant effect of human capital index (HCI) on economic growth (GWP) in the long run, and a positive and statistically significant effect of FDI (GFDI) on economic growth (GWP) in the long run. The estimation results indicate that a 1% increase in (HCI) decreases (GWP) by 0.272%, and a 1% increase in (GFDI) increases (GWP) by 0.006%. This study is one of the few studies that highlight the challenges facing both HC and FDI in increasing economic growth in Jordan and provides some recommendations.

Suggested Citation

  • Mustafa Mohammad Alalawneh, 2020. "The Impact of Human Capital and Foreign Direct Investment on Economic Growth: An Empirical Study on Jordan," Business and Economic Research, Macrothink Institute, vol. 10(2), pages 182-196, June.
    • Handle: RePEc:mth:ber888:v:10:y:2020:i:2:p:182-196
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    References listed on IDEAS

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    More about this item

    Keywords

    Human Capital; Foreign Direct Investment; ARDLBT; Jordan;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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