Impacts of Natural Resource Rents, Institutional Quality, and FDI on the Development of Human Capital: Evidence from Sub Saharan African Countries

FeredeMengistie Alemu ()
Additional contact information
FeredeMengistie Alemu: Debre Tabor University

Journal of the Knowledge Economy, 2025, vol. 16, issue 5, No 20, 16129-16151

Abstract: Abstract Ensuring human capital development is a means to escape developing countries from a slump economy and chronic poverty. The quality of human capital has not improved enough, even though the region is endowed with natural resources rents and high foreign direct investments. This calls for how resource, FDI, and institutional quality determine the year of schooling and education returns. The main objective of this study was to investigate the impacts of natural resource rents, institutional quality, and foreign direct investment on the development of human capital: evidence from sub-Saharan African countries. For this purpose, data was obtained from the World Bank and Penn World Data bases from 2010–2022. The descriptive statistics, FGLS, and the system GMM panel data estimations were employed. The study revealed that in the region, from 2010 to 2022, the average growth rate of natural resource rent as a percentage of GDP, FDI, and human capital were 10%, 4.5%, and 1.8%, respectively. Since 2010, there has been weak institutional quality in the region because the score of institutional quality lies between 0 and -2.5.The empirical results confirmed that human capital is negatively affected by institutional quality proxies (control of corruption, economic and social right protection, rule of law, and regularity quality), foreign direct investment, and natural resource rents. But it is positively affected by institutional quality proxies (government effectiveness and political stability) and the past level of schooling and education returns. The result concludes that natural resource rents and weak institutional quality have degraded year of schooling, while solid institutional quality enhances human capital development. The study suggested that in order to improve schooling and returns to education in the region, FDI that uses highly skilled labour should expand; the natural resource rents should be allocated to educational investments rather than investing more in the mining industry that raises children dropping out of school; and solid institutions for good governance that are capable of preparing students to meet the challenges of the future sustainably should be capitalized.

Keywords: Africa; Human capital; FDI; Institutional quality; Resource rent; System GMM model (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s13132-024-02449-z Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jknowl:v:16:y:2025:i:5:d:10.1007_s13132-024-02449-z

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/13132

DOI: 10.1007/s13132-024-02449-z

Access Statistics for this article

Journal of the Knowledge Economy is currently edited by Elias G. Carayannis

More articles in Journal of the Knowledge Economy from Springer, Portland International Center for Management of Engineering and Technology (PICMET)
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().