An empirical study of foreign direct investment, human development and endogenous growth

Abstract

In the context of growing bodies of researching in foreign direct investment (FDI), what could be better than effective external financial source for developing countries? It is undoubtable to observe that FDI could foster the slow economic growth and improve the human development. Employing the predictive proxy called 'human development index (HDI)' commenced since 2010 by United Nation Development Programme (UNDP), this paper investigates the three determinants including life expectancy, education and income level of economic development in 102 developing countries during the period 1990-2015 by two-stage least squares method, correcting the endogeneity problem with particular instrumental variables. Our findings confirm the existing literature and emphasise the constructive role of foreign capital flows and human capital on economic growth and institutional quality as well as macroeconomic variables and gender equality.