Determinants of Trade Openness in Transitional Economies: Does the Complementarity between Foreign Direct Investment and Human Capital Development Matter?

Abstract

Purpose: The study explored the determinants of trade openness in transitional economies. The impact of the complementarity between foreign direct investment (FDI) and human capital development on trade openness in transitional economies was also a subject of investigation. Design/Approach/Methodology: The study used panel data analysis methods, namely the dynamic generalized methods of moments (GMM), fixed effects, pooled ordinary least squares (OLS), random effects with panel data from 2000 to 2018. Findings: Human capital development, the interaction between FDI and human capital development, economic growth and mining sector growth were found to have a significant positive impact on trade openness in transitional economies. Practical Implication: Transitional economies are therefore urged to develop and implement policies earmarked at improving, FDI inflows, human capital development, economic growth, and mining sector growth if they intend not only to expand trade openness but to benefit from trade openness as well. Originality/Value: The impact of the complementarity between FDI and human capital development on trade openness has so far not yet been explored, to the author's best knowledge.