Foreign Direct Investment-Economic Growth Nexus: The Role of Human Capital Development in the Common Market for Eastern and Southern Africa Region

Abstract

This study uses country-level panel data to investigate the impact of foreign direct investment on the gross domestic product per capita in the Common Market for Eastern and Southern Africa region over the 2000-2015 period. The estimates are generated using the one-step generalized method of moments-difference estimator. The study found that foreign direct investment exerted a negative while human capital development has a positive impact on the gross domestic product per capita in the region. Additionally, the development of human capital has a positive effect on the ability of the region to absorb and benefit from the spillovers of foreign direct investment. The findings suggest that the countries of the region should target to attract foreign direct investment which complements economic growth and improve on the development of human capital in order to continue realizing positive economic growth from the said investment.