IDEAS home Printed from https://ideas.repec.org/a/nwe/eajour/y2021i3p355-371.html
   My bibliography  Save this article

Foreign Financial Flows, Human Capital and Economic Growth in North African Countries

Author

Listed:
  • Imen Mohamed Sghaier

    (Higher Institute of Business Administration, University of Sfax, Tunisia)

Abstract

The purpose of this study is to analyze the relationship between foreign financial flows (i.e., FDI inflows and remittances), human capital, and its effects on economic growth in 4 North African countries. Annual panel data from 2000 to 2018 are examined using the system GMM. First, we found strong evidence of a positive link between FDI and economic growth. Moreover, the results indicate that the complementarity between FDI and human capital positively influences economic growth. Second, the remittances are found to be positive factors for economic growth. In fact, higher human capital accumulation of receiving countries increases these positive impacts. Overall, the results indicate that foreign financial flows are positively correlated with human capital in influencing economic growth in the North African countries. Therefore, it becomes pertinent for policymakers to pursue a human capital policy to improve their absorptive capacities to exploit full benefits of foreign financial flows.

Suggested Citation

  • 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.
    • Handle: RePEc:nwe:eajour:y:2021:i:3:p:355-371
    as

    Download full text from publisher

    File URL: https://www.unwe.bg/doi/eajournal/2021.3/EA.2021.3.02.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Heckman, James J. & Jacobs, Bas, 2009. "Policies to Create and Destroy Human Capital in Europe," IZA Discussion Papers 4680, Institute of Labor Economics (IZA).
    3. Chuang, Yih-Chyi, 1998. "Learning by Doing, the Technology Gap, and Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 697-721, August.
    4. Azman-Saini, W.N.W. & Law, Siong Hook & Ahmad, Abd Halim, 2010. "FDI and economic growth: New evidence on the role of financial markets," Economics Letters, Elsevier, vol. 107(2), pages 211-213, May.
    5. Tang, Yingkai & Zhang, Kevin H., 2016. "Absorptive capacity and benefits from FDI: Evidence from Chinese manufactured exports," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 423-429.
    6. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    7. Nigel Driffield & Chris Jones, 2013. "Impact of FDI, ODA and Migrant Remittances on Economic Growth in Developing Countries: A Systems Approach," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 25(2), pages 173-196, April.
    8. Lee, Lung-fei & Yu, Jihai, 2010. "Estimation of spatial autoregressive panel data models with fixed effects," Journal of Econometrics, Elsevier, vol. 154(2), pages 165-185, February.
    9. Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, December.
    10. Di Maria, Corrado & Lazarova, Emiliya A., 2012. "Migration, Human Capital Formation, and Growth: An Empirical Investigation," World Development, Elsevier, vol. 40(5), pages 938-955.
    11. Cleeve, Emmanuel A. & Debrah, Yaw & Yiheyis, Zelealem, 2015. "Human Capital and FDI Inflow: An Assessment of the African Case," World Development, Elsevier, vol. 74(C), pages 1-14.
    12. Gui-Diby, Steve Loris, 2014. "Impact of foreign direct investments on economic growth in Africa: Evidence from three decades of panel data analyses," Research in Economics, Elsevier, vol. 68(3), pages 248-256.
    13. Graham Bird & Yongseok Choi, 2020. "The effects of remittances, foreign direct investment, and foreign aid on economic growth: An empirical analysis," Review of Development Economics, Wiley Blackwell, vol. 24(1), pages 1-30, February.
    14. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    15. H. Brooks, Douglas & Hasan, Rana & Lee, Jong-Wha & H. Son, Hyun & Zhuang, Juzhong, 2010. "Closing Development Gaps: Challenges and Policy Options," Asian Development Review, Asian Development Bank, vol. 27(2), pages 1-28.
    16. Iamsiraroj, Sasi, 2016. "The foreign direct investment–economic growth nexus," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 116-133.
    17. Nawaz, Saima, 2015. "Growth effects of institutions: A disaggregated analysis," Economic Modelling, Elsevier, vol. 45(C), pages 118-126.
    18. Adams, Samuel & Klobodu, Edem Kwame Mensah, 2016. "Remittances, regime durability and economic growth in Sub-Saharan Africa (SSA)," Economic Analysis and Policy, Elsevier, vol. 50(C), pages 1-8.
    19. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
    20. Mim, Sami Ben & Ali, Mohamed Sami Ben, 2012. "Through which channels can remittances spur economic growth in MENA countries?," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 6, pages 1-27.
    21. Fang, Zheng & Chang, Youngho, 2016. "Energy, human capital and economic growth in Asia Pacific countries — Evidence from a panel cointegration and causality analysis," Energy Economics, Elsevier, vol. 56(C), pages 177-184.
    22. Giuliano, Paola & Ruiz-Arranz, Marta, 2009. "Remittances, financial development, and growth," Journal of Development Economics, Elsevier, vol. 90(1), pages 144-152, September.
    23. Thanh Le, 2009. "Trade, Remittances, Institutions, and Economic Growth," International Economic Journal, Taylor & Francis Journals, vol. 23(3), pages 391-408.
    24. Blaise Gnimassoun & John C. Anyanwu, 2019. "The Diaspora and economic development in Africa," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(4), pages 785-817, November.
    25. Mohamed Abdouli & Anis Omri, 2021. "Exploring the Nexus Among FDI Inflows, Environmental Quality, Human Capital, and Economic Growth in the Mediterranean Region," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(2), pages 788-810, June.
    26. Barro, Robert J & Sala-i-Martin, Xavier, 1997. "Technological Diffusion, Convergence, and Growth," Journal of Economic Growth, Springer, vol. 2(1), pages 1-26, March.
    27. Bouoiyour, Jamal & Miftah, Amal & Mouhoud, El Mouhoub, 2016. "Education, male gender preference and migrants' remittances: Interactions in rural Morocco," Economic Modelling, Elsevier, vol. 57(C), pages 324-331.
    28. Noorbakhsh, Farhad & Paloni, Alberto & Youssef, Ali, 2001. "Human Capital and FDI Inflows to Developing Countries: New Empirical Evidence," World Development, Elsevier, vol. 29(9), pages 1593-1610, September.
    29. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    30. D. O. Olayungbo & Ahmod Quadri, 2019. "Remittances, financial development and economic growth in sub-Saharan African countries: evidence from a PMG-ARDL approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-25, December.
    31. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    32. Perekunah Eregha, 2012. "The Dynamic Linkages between Foreign Direct Investment and Domestic Investment in ECOWAS Countries: A Panel Cointegration Analysis," African Development Review, African Development Bank, vol. 24(3), pages 208-220.
    33. Kamal Saggi, 2002. "Trade, Foreign Direct Investment, and International Technology Transfer: A Survey," The World Bank Research Observer, World Bank, vol. 17(2), pages 191-235, September.
    34. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    35. Seiko Minota Zekarias, 2016. "The Impact of Foreign Direct Investment (FDI) on Economic Growth in Eastern Africa: Evidence from Panel Data Analysis," Applied Economics and Finance, Redfame publishing, vol. 3(1), pages 145-160, February.
    36. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
    37. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    38. David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group.
    39. Mim, Sami Ben & Ali, Mohamed Sami Ben, 2012. "Through which channels can remittances spur economic growth in MENA countries?," Economics Discussion Papers 2012-8, Kiel Institute for the World Economy (IfW Kiel).
    40. Catrinescu, Natalia & Leon-Ledesma, Miguel & Piracha, Matloob & Quillin, Bryce, 2009. "Remittances, Institutions, and Economic Growth," World Development, Elsevier, vol. 37(1), pages 81-92, January.
    41. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    42. Lin, Xu & Lee, Lung-fei, 2010. "GMM estimation of spatial autoregressive models with unknown heteroskedasticity," Journal of Econometrics, Elsevier, vol. 157(1), pages 34-52, July.
    43. Nyamongo, Esman Morekwa & Misati, Roseline N. & Kipyegon, Leonard & Ndirangu, Lydia, 2012. "Remittances, financial development and economic growth in Africa," Journal of Economics and Business, Elsevier, vol. 64(3), pages 240-260.
    44. Lim, Sokchea & Simmons, Walter O., 2015. "Do remittances promote economic growth in the Caribbean Community and Common Market?," Journal of Economics and Business, Elsevier, vol. 77(C), pages 42-59.
    45. Poirine, Bernard, 1997. "A theory of remittances as an implicit family loan arrangement," World Development, Elsevier, vol. 25(4), pages 589-611, January.
    46. Adams, Samuel, 2009. "Foreign Direct investment, domestic investment, and economic growth in Sub-Saharan Africa," Journal of Policy Modeling, Elsevier, vol. 31(6), pages 939-949, November.
    47. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    48. Oketch, Moses O., 2006. "Determinants of human capital formation and economic growth of African countries," Economics of Education Review, Elsevier, vol. 25(5), pages 554-564, October.
    49. Chong Siew Huay & Jonathan Winterton & Yasmin Bani & Bolaji Tunde Matemilola, 2019. "Do remittances promote human development? Empirical evidence from developing countries," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 46(10), pages 1173-1185, October.
    50. Li, Chengchun & Tanna, Sailesh, 2019. "The impact of foreign direct investment on productivity: New evidence for developing countries," Economic Modelling, Elsevier, vol. 80(C), pages 453-466.
    51. John Egyir & Daniel Sakyi & Samuel Tawiah Baidoo, 2020. "How does capital flows affect the impact of trade on economic growth in Africa?," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 29(3), pages 353-372, April.
    52. Ogundari, Kolawole & Awokuse, Titus, 2018. "Human capital contribution to economic growth in Sub-Saharan Africa: Does health status matter more than education?," Economic Analysis and Policy, Elsevier, vol. 58(C), pages 131-140.
    53. Arvanitis, Spyros & Loukis, Euripidis N., 2009. "Information and communication technologies, human capital, workplace organization and labour productivity: A comparative study based on firm-level data for Greece and Switzerland," Information Economics and Policy, Elsevier, vol. 21(1), pages 43-61, February.
    54. Anwar, Sajid & Cooray, Arusha, 2015. "Financial flows and per capita income in developing countries," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 304-314.
    55. Veasna Kheng & Sizhong Sun & Sajid Anwar, 2017. "Foreign direct investment and human capital in developing countries: a panel data approach," Economic Change and Restructuring, Springer, vol. 50(4), pages 341-365, November.
    56. H. Brooks, Douglas & Hasan, Rana & Lee, Jong-Wha & H. Son, Hyun & Zhuang, Juzhong, 2010. "Closing Development Gaps: Challenges and Policy," ADB Economics Working Paper Series 209, Asian Development Bank.
    57. Reiter, S.L. & Steensma, H. Kevin, 2010. "Human Development and Foreign Direct Investment in Developing Countries: The Influence of FDI Policy and Corruption," World Development, Elsevier, vol. 38(12), pages 1678-1691, December.
    58. 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.
    59. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    60. Daniel Sakyi & José Villaverde & Adolfo Maza & Isaac Bonuedi, 2017. "The Effects of Trade and Trade Facilitation on Economic Growth in Africa," African Development Review, African Development Bank, vol. 29(2), pages 350-361, June.
    61. Jakob Haan, 2007. "Political institutions and economic growth reconsidered," Public Choice, Springer, vol. 131(3), pages 281-292, June.
    62. Lee, Lung-fei, 2007. "GMM and 2SLS estimation of mixed regressive, spatial autoregressive models," Journal of Econometrics, Elsevier, vol. 137(2), pages 489-514, April.
    63. Cynthia Bansak & Brian Chezum, 2009. "How Do Remittances Affect Human Capital Formation of School-Age Boys and Girls?," American Economic Review, American Economic Association, vol. 99(2), pages 145-148, May.
    64. Faisal Sultan Qadri & Abdul Waheed, 2013. "Human capital and economic growth: Cross-country evidence from low-, middle- and high-income countries," Progress in Development Studies, , vol. 13(2), pages 89-104, April.
    65. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sujuan Wang & Xiaonan Lin & Honggen Xiao & Naipeng Bu & Yanan Li, 2022. "Empirical Study on Human Capital, Economic Growth and Sustainable Development: Taking Shandong Province as an Example," Sustainability, MDPI, vol. 14(12), pages 1-22, June.
    2. Ming Zhong & Jingjing Yu & Syed Anees Haider Zaidi, 2024. "Investigating the Impact of Financial Inclusion on Energy Consumption: Does Corruption Matter?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 8797-8814, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. 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.
    3. Imen Mohamed Sghaier, 2021. "Remittances and Economic Growth in MENA Countries: The Role of Financial Development," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 1, pages 43-59, March.
    4. Imen Mohamed Sghaier, 2020. "Does Financial Development Affect the Economic Growth Gains from Trade Openness?," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 4, pages 666-682, December.
    5. Aribah Aslam, 2020. "The hotly debate of human capital and economic growth: why institutions may matter?," Quality & Quantity: International Journal of Methodology, Springer, vol. 54(4), pages 1351-1362, August.
    6. Nahed Zghidi & Imen Mohamed Sghaier & Zouheir Abida, 2018. "Remittances, Institutions, and Economic Growth in North African Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 9(3), pages 804-821, September.
    7. Zaiter Lahimer, Mahjouba, 2011. "L’impact des entrées de capitaux privés sur la croissance économique dans les pays en développement," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/7670 edited by Sterdyniak, Henri.
    8. Jochen Hartwig, 2009. "A panel Granger-causality test of endogenous vs. exogenous growth," KOF Working papers 09-231, KOF Swiss Economic Institute, ETH Zurich.
    9. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-72.
    10. Imen Mohamed Sghaier, 2023. "Trade openness, financial development and economic growth in North African countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1729-1740, April.
    11. Ulaşan, Bülent, 2012. "Cross-country growth empirics and model uncertainty: An overview," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 6, pages 1-69.
    12. Charles Ackah, & Oliver Morrissey, 2007. "Trade Liberalisation is Good for You if You are Rich," Discussion Papers 07/01, University of Nottingham, CREDIT.
    13. Magrini, Stefano, 2004. "Regional (di)convergence," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 62, pages 2741-2796, Elsevier.
    14. E. Tsanana & X. Chapsa & C. Katrakilidis, 2016. "Is growth corrupted or bureaucratic? Panel evidence from the enlarged EU," Applied Economics, Taylor & Francis Journals, vol. 48(33), pages 3131-3147, July.
    15. Olusanya, Oluwakorede, 2020. "Asymmetric Effect of Foreign Direct Investment on Manufacturing Sector Performance in Nigeria," MPRA Paper 113029, University Library of Munich, Germany.
    16. Adams, Samuel & Opoku, Eric Evans Osei, 2015. "Foreign direct investment, regulations and growth in sub-Saharan Africa," Economic Analysis and Policy, Elsevier, vol. 47(C), pages 48-56.
    17. Bayraktar-Sağlam, Bahar & Yetkiner, Hakan, 2014. "A Romerian contribution to the empirics of economic growth," Journal of Policy Modeling, Elsevier, vol. 36(2), pages 257-272.
    18. Imen Mohamed Sghaier, 2022. "The Role of Institutional Quality in Finance-Growth Nexus: Evidence from North African Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(4), pages 3472-3491, December.
    19. Siddiqui, Danish Ahmed & Ahmed, Qazi Masood, 2013. "The effect of institutions on economic growth: A global analysis based on GMM dynamic panel estimation," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 18-33.
    20. Celine Bonnefond, 2014. "Growth Dynamics And Conditional Convergence Among Chinese Provinces: A Panel Data Investigation Using System Gmm Estimator," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 39(4), pages 1-25, December.

    More about this item

    Keywords

    economic growth; FDI; human capital; remittances;
    All these keywords.

    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • N97 - Economic History - - Regional and Urban History - - - Africa; Oceania
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nwe:eajour:y:2021:i:3:p:355-371. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Vanya Lazarova (email available below). General contact details of provider: https://edirc.repec.org/data/unweebg.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.