The Role of Human Capital in FDI Inflows: A Panel Study on ECOWAS Countries
The Role of Human Capital in FDI Inflows: A Panel Study on ECOWAS Countries

Summary/Abstract: The main purpose of this paper is to empirically investigate the role of human capital on the Foreign Direct Investment (FDI) inflows toward ECOWAS countries (Economic Community of West African States). FDI is seen as one of the most important tools that promote economic growth, employment, technology transfer and currencies’ inflows in a country. In many African countries, despite reforms implemented, FDI inflows continue to be relatively low. Many studies evaluating the main determinants of FDI in African countries have revealed that one of the most important determinants is human capital. However, in many African countries, human capital is among the least developed in the world. Therefore, an empirical analysis is conducted to investigate the role of human capital in the inflows of FDI of ECOWAS countries. For this purpose, a panel data is used for the fourteen members of ECOWAS countries over the period 1991-2015 where human capital is proxied by both adult literacy rate and degree of freedom. The empirical findings revealed that the degree of freedom is the main proxy for the human capital while the adult literacy rate is not statistically significant.

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