Human capital interaction on foreign aid-growth nexus: evidence from South Asia and sub-Saharan Africa

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Stanley Emife Nwani
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Foreign Aid ◽  
South Asia ◽  
Unit Root ◽  
Sub Saharan Africa ◽  
Panel Unit Root ◽  
Content Type ◽  
Sub Saharan ◽  
Centre Piece

Purpose The purpose of this study is to examine the interactive role of human capital development (HCD) in foreign aid-growth relations in South Asia and sub-Saharan Africa countries from 1985–2019. Design/methodology/approach The study used panel data that cut across all countries in South Asia and sub-Saharan Africa collected from The World Bank’s Development Indicators. The data were analysed using Bai and Ng panel unit root idiosyncratic cross-sectional tests and the system generalised method of moments (SGMM). Findings The study found that foreign aid and HCD have negative impacts on economic growth. Fortunately, the interaction of human capital with foreign aid reduces the extent to which foreign aid impedes economic growth. The presumption is that South Asia and sub-Saharan Africa economies had not reaped the potential growth effect of foreign aid inflows due to high illiteracy rates and weak social capacities. The peculiarity of these regions hinders the absorptive capacity to transform positive externality associated with foreign aid into sizeable economic prosperity. Practical implications It is imperative for South Asia and sub-Saharan Africa countries to not depend on foreign aid; instead, the strategic action by policymakers should be to developing sustainable social capacities with HCD as the centre-piece. Originality/value The highpoint of this study is its inter-regional approach and the interplay between human capital and foreign aid using the second generation panel unit root estimator and the SGMM approaches.

Human capital threshold, foreign direct investment and economic growth: evidence from sub-Saharan Africa

2020 ◽  
Vol 19 (3) ◽  
pp. 323-337 ◽  
Author(s):  
Friday Osemenshan Anetor
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Generalized Method Of Moments ◽  
Mediating Effect ◽  
Sub Saharan Africa ◽  
Growth Effect ◽  
Content Type ◽  
Sub Saharan

Purpose The purpose of this study is to analyze the mediating effect of human capital in foreign direct investment (FDI) and growth nexus and establish the threshold of human capital in 28 sub-Saharan African (SSA) countries over the period 1999–2017. Design/methodology/approach This study used a secondary source of data obtained from the World Development Indicator and used the system generalized method of moments and dynamic panel threshold regression (TR) to analyze the data. Findings This study found that FDI and human capital have no significant impact on the economic growth in SSA. However, when the interactive term of FDI and human capital was introduced in the model, the economic growth effect of FDI became positive and significant, while the coefficient of the interactive term is negative and significant. This presupposes that SSA does not have a sufficient high-quality workforce that can absorb and transform the spillover benefits of FDI into economic growth. As a result, this study applied the TR to determine the minimum level of human capital and established a threshold level at 63.91%. Practical implications It, therefore, becomes pertinent for policymakers in the SSA region to have a human capital policy to build up their absorptive capacities to fully take advantage of FDI. Originality/value The contribution of this study lies in establishing a threshold of human capital at 63.91% for countries in the SSA region.

Foreign aid and economic growth in sub-Saharan Africa

2019 ◽  
Vol 11 (1) ◽  
pp. 147-168 ◽  
Author(s):  
Nihar Ranjan Jena ◽  
Narayan Sethi
Keyword(s):  
Economic Growth ◽  
Foreign Aid ◽  
Sub Saharan Africa ◽  
Cointegration Test ◽  
Modeling Framework ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
Sub Saharan ◽  
The Impact

Purpose The purpose of this paper is to empirically examine the effectiveness of foreign aid in improving economic growth prospects in the sub-Saharan Africa (SSA) region from 1993 to 2017. Design/methodology/approach A sample of 45 SSA countries for the period 1993–2017 is considered for this study. The study uses various econometrics tools such as Pedroni and Kao’s cointegration test, Johansen-Fisher Panel cointegration test, FMOLS and PDOLS in order to ascertain the long-run and short-run dynamics among the variables under consideration. Findings The empirical results find that long-run and short-run relationships exist among foreign aid, economic growth, investment, financial deepening, price stability and trade openness of the SSA economies. The authors also find unidirectional causality running from foreign aid to economic growth. The policymakers in these countries are well-advised to implement suitable policy measures to build on the growth momentum created by foreign aid inflows. Originality/value The study uses a dynamic macroeconomic modeling framework to assess the impact of aid flows on economic growth in the SSA region. Taking into account the diversity of level of growth experienced by the 45 countries in the region, the study uses an appropriate regression technique, i.e., panel dynamic OLS whose results are robust. The finding is also supported by the Granger-causality test and robust cointegration techniques.

Innovation, institutions and economic growth in sub-Saharan Africa – an IV estimation of a panel threshold model

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Joseph Ato Forson ◽  
Rosemary Afrakomah Opoku ◽  
Michael Owusu Appiah ◽  
Evans Kyeremeh ◽  
Ibrahim Anyass Ahmed ◽  
...  
Keyword(s):  
Economic Growth ◽  
Developing Economies ◽  
Innovation Policy ◽  
Threshold Model ◽  
Sub Saharan Africa ◽  
Content Type ◽  
Panel Regressions ◽  
Sub Saharan ◽  
The Impact ◽  
The Relationship

PurposeThe significant impact of innovation in stimulating economic growth cannot be overemphasized, more importantly from policy perspective. For this reason, the relationship between innovation and economic growth in developing economies such as the ones in Africa has remained topical. Yet, innovation as a concept is multi-dimensional and cannot be measured by just one single variable. With hindsight of the traditional measures of innovation in literature, we augment it with the number of scientific journals published in the region to enrich this discourse.Design/methodology/approachWe focus on an approach that explores innovation policy qualitatively from various policy documents of selected countries in the region from three policy perspectives (i.e. institutional framework, financing and diffusion and interaction). We further investigate whether innovation as perceived differently is important for economic growth in 25 economies in sub-Saharan Africa over the period 1990–2016. Instrumental variable estimation of a threshold regression is used to capture the contributions of innovation as a multi-dimensional concept on economic growth, while dealing with endogeneity between the regressors and error term.FindingsThe results from both traditional panel regressions and IV panel threshold regressions show a positive relationship between innovation and economic growth, although the impact seems negligible. Institutional quality dampens innovation among low-regime economies, and the relation is persistent regardless of when the focus is on aggregate or decomposed institutional factors. The impact of innovation on economic growth in most regressions is robust to different dimensions of innovation. Yet, the coefficients of the innovation variables in the two regimes are quite dissimilar. While most countries in the region have offered financial support in the form of budgetary allocations to strengthen institutions, barriers to the design and implementation of innovation policies may be responsible for the sluggish contribution of innovation to the growth pattern of the region.Originality/valueSegregating economies of Africa into two distinct regimes based on a threshold of investment in education as a share of GDP in order to understand the relationship between innovation and economic growth is quite novel. This lends credence to the fact that innovation as a multifaceted concept does not take place by chance – it is carefully planned. We have enriched the discourse of innovation and thus helped in deepening understanding on this contentious subject.

Interactive effects of human capital in finance–economic growth nexus in Sub-Saharan Africa

2018 ◽  
Vol 45 (6) ◽  
pp. 1192-1210 ◽  
Author(s):  
Muazu Ibrahim
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Interactive Effect ◽  
Financial Sector ◽  
Content Type ◽  
Long Run ◽  
The World ◽  
Sub Saharan ◽  
Ssa Countries

Purpose The purpose of this paper is to examine the interactive effect of human capital in financial development–economic growth nexus. Relative to the quantity-based measure of enrolment rates, the main aim was to determine how quality of human capital proxied by pupil–teacher ratio influences the relationship between domestic financial sector development and overall economic growth. Design/methodology/approach Data are obtained from the World Development Indicators of the World Bank for 29 sub-Saharan African (SSA) countries over the period 1980–2014. The analyses were conducted using the system generalised method of moments within the endogenous growth framework while controlling for country-specific and time effects. The author also follows Papke and Wooldridge procedure in examining the long-run estimates of the variables of interest. Findings The key finding is that, while both human capital and financial development unconditionally promotes growth in both the short and long run, results from the interactive terms suggest that, irrespective of the measure of finance, financial sector development largely spurs growth on the back of quality human capital. This finding is also confirmed by the marginal and net effects where the interactive effect of pupil–teacher ratio and indicators of finance are consistently huge relative to the enrolment. Statistically, the results are robust to model specification. Practical implications While it is laudable for SSA countries to increase access to education, it is equally more crucial to increase the supply of teachers at the same time improving on the limited teaching and learning materials. Indeed, there are efforts to develop rather low levels of the financial sector owing to its unconditional growth effects. Beyond the direct benefit of finance, however, higher growth effect of finance is conditioned on the quality level of human capital. The outcome of this study should therefore reignite the recognition of the complementarity role of human capital and finance in economic growth process. Originality/value The study makes significant contributions to existing finance–growth literature in so many ways: first, the auhor extend the literature by empirically examining how different measures of human capital shape the finance–economic growth nexus. Through this the author is able to bring a different perspective in the literature highlighting the role of countries’ human capital stock in mediating the impact of financial deepening on economic growth. Second, the author makes a more systematic attempt to evaluate the relative importance of finance and human capital in growth process while controlling for several ancillary variables.

Nutrition and economic growth in sub-Saharan Africa: a causality test using panel data

2017 ◽  
Vol 16 (2) ◽  
pp. 174-189
Author(s):  
Kolawole Ogundari ◽  
Adebayo Aromolaran
Keyword(s):  
Economic Growth ◽  
Design Methodology ◽  
Sub Saharan Africa ◽  
Dynamic Panel ◽  
Causality Test ◽  
Panel Causality ◽  
Content Type ◽  
Causality Tests ◽  
Short Run ◽  
Sub Saharan

Purpose This study aims to investigate the causal relationship between nutrition and economic growth in sub-Saharan Africa. Design/methodology/approach A dynamic panel causality test based on the Blundell-Bond’s system generalized methods-of-moment was used. To make efficient inference for the estimates, the authors check for the panel unit root and co-integration relationship amongst the variables. Findings The variables were found to be non-stationary at level, stationary after first difference and co-integrated. The results of the causality tests reveal evidence of long and short-run bidirectional causality between nutrition and economic growth, which implies that nutritional improvement is a cause and consequence of economic growth and vice versa. Originality/value This is the first study to consider causality between nutrition and economic growth in the region.

scholarly journals THE EFFECT OF HUMAN CAPITAL ON ECONOMIC GROWTH IN SOME SUB SAHARA AFRICAN COUNTRIES (SSA)

2021 ◽  
Vol 5 (1) ◽  
pp. 1-24
Author(s):  
AISHA AHMAD SAJOH
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Data Base ◽  
Generalized Method Of Moments ◽  
Sub Saharan Africa ◽  
Unique Contribution ◽  
African Countries ◽  
Sub Saharan ◽  
Table Data ◽  
The Impact

Purpose: This research looked into debate on the possible impact of human capital on economic growth in Sub-Saharan Africa (SSA) and considers two alternative measures of human capital: health and education. Methodology: The research used a dynamic model based on the system generalized method of moments (SGMM) and analysed a balanced panel data covering 35 countries from 1986–2018. The research used Microsoft excel to record all the data gotten from the world indicator data base from world bank, penn world table data base and CANA database. The analysis was presented in a tabular form. Findings: This study found that human capital has an overall positive and statistically significant impact on economic growth in the SSA region, although, democracy has a negative and statistically significant impact on economic growth in the region. This finding shows the importance of both measures of human capital and aligns with the argument in the literature that neither education nor health is a perfect substitute for the other as a measure of human capital. Unique contribution to theory, practice and policy:Generally, the finding emphasised that both education and health measures of human capital are important, and that policymakers must consider the level of economic development while formulating policies that can enhance the impact of human capital on economic growth in the Sub-Saharan Africa region.

How does foreign direct investment affect growth in sub-Saharan Africa? New evidence from threshold analysis

2020 ◽  
Vol 47 (1) ◽  
pp. 149-181 ◽  
Author(s):  
Oyakhilome Ibhagui
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Population Growth ◽  
Direct Investment ◽  
Sub Saharan Africa ◽  
Threshold Analysis ◽  
Content Type ◽  
Threshold Levels ◽  
Sub Saharan ◽  
Ssa Countries

PurposeThe threshold regression framework is used to examine the effect of foreign direct investment on growth in Sub-Saharan Africa (SSA). The growth literature is awash with divergent evidence on the role of foreign direct investment (FDI) on economic growth. Although the FDI–growth nexus has been studied in diverse ways, very few studies have examined the relationship within the framework of threshold analysis. Furthermore, even where this framework has been adopted, none of the previous studies has comprehensively examined the FDI–growth nexus in the broader SSA. In this paper, within the standard panel and threshold regression framework, the problem of determining the growth impact of FDI is revisited.Design/methodology/approachSix variables are used as thresholds – inflation, initial income, population growth, trade openness, financial market development and human capital, and the analysis is based on a large panel data set that comprises 45 SSA countries for the years 1985–2013.FindingsThe results of this study show that the direct impact of FDI on growth is largely ambiguous and inconsistent. However, under the threshold analysis, it is evident that FDI accelerates economic growth when SSA countries have achieved certain threshold levels of inflation, population growth and financial markets development. This evidence is largely invariant qualitatively and is robust to different empirical specifications. FDI enhances growth in SSA when inflation and private sector credit are below their threshold levels while human capital and population growth are above their threshold levels.Originality/valueThe contribution of this paper is twofold. First, the paper streamlines the threshold analysis of FDI–growth nexus to focus on countries in SSA – previous studies on FDI-growth nexus in SSA are country-specific and time series–based (see Tshepo, 2014; Raheem and Oyınlola, 2013 and Bende-Nabende, 2002). This paper provides a panel analysis and considers a broader set of up to 45 SSA countries. Such a broad set of SSA countries had never been considered in the literature. Second, the paper expands on available threshold variables to include two new important macroeconomic variables, population growth and inflation which, though are important absorptive capacities but, until now, had not been used as thresholds in the FDI–growth literature. The rationale for including these variables as thresholds stems from the evidence of an empirical relationship between population growth and economic growth, see Darrat and Al-Yousif (1999), and between inflation and economic growth, see Kremer et al. (2013).

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