Foreign Capital Inflows and Economic Growth in North African Countries: the Role of Human Capital

This study investigates the relationship between foreign capital inflows (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 GMM estimator. First, we found strong evidence of a positive link between foreign direct investment 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, the higher human capital accumulation of receiving countries increases these positive impacts. Overall, the results indicate that foreign capital inflows are positively correlated with human capital in influencing economic growth in the North African countries. Therefore, the significant implications are that particular attention will be paid to human capital in these countries, and appropriate government policies are required for better absorption of foreign capital inflows.