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

Bouzayani Rajab () and Abida Zouheir ()
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Bouzayani Rajab: University of Sfax
Abida Zouheir: University of Sfax

Journal of the Knowledge Economy, 2024, vol. 15, issue 2, No 85, 7216-7236

Abstract: 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.

Keywords: Foreign direct investment; Human capital threshold; Economic growth; GMM (search for similar items in EconPapers)
JEL-codes: F21 J24 O40 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s13132-023-01314-9

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