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Complementarity Relationship Between Foreign Direct Investment, Human Capital Threshold and Economic Growth: State of the 15 Least Developed African Countries

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  • Bouzayani Rajab

    (University of Sfax)

  • Abida Zouheir

    (University of Sfax)

Abstract

This study analyzes the mediating effect of human capital between foreign direct investment and economic growth and establishes the human capital threshold for the last 15 least developed African countries over the period from 2000 to 2019. The used econometric technique GMM and the regression of the dynamic threshold (TR) showed that foreign direct investment and human capital have no significant impact on economic growth. If the term ‘interaction’ between foreign direct investment and human capital has been introduced into the model, the effect of foreign direct investment becomes positive and significant. However, the coefficient of the interaction term is negative and statistically significant. This presupposes that countries do not have a sufficient labor force to absorb and disseminate the benefits of foreign direct investment. For this reason, this study applied the TR to determine the minimum level of human capital and established a threshold of 61.57%. It therefore becomes relevant for decision-makers in the countries concerned to develop human capital to strengthen their absorption capacities in order to reap the full benefits of foreign direct investment.

Suggested Citation

  • Bouzayani Rajab & Abida Zouheir, 2024. "Complementarity Relationship Between Foreign Direct Investment, Human Capital Threshold and Economic Growth: State of the 15 Least Developed African Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 7216-7236, June.
    • Handle: RePEc:spr:jknowl:v:15:y:2024:i:2:d:10.1007_s13132-023-01314-9
    DOI: 10.1007/s13132-023-01314-9
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    References listed on IDEAS

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    More about this item

    Keywords

    Foreign direct investment; Human capital threshold; Economic growth; GMM;
    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

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