ASYMMETRIC EFFECTS OF FOREIGN DIRECT INVESTMENT AND HUMAN CAPITAL ON ECONOMIC DEVELOPMENT: NEW EVIDENCE FROM PAKISTAN
DOI:
https://doi.org/10.51200/mjbe.v12i2.7077Keywords:
FDI, Human Capital, Natural resources, NARD Model, PakistanAbstract
The aim of the current study is to examine the asymmetric nexus between FDI, human capital and economic development in Pakistan for the period of 1980-2021. Using a nonlinear autoregressive distributed lag model (NARDL), we investigate the impact of positive and negative shocks in FDI and Human capital on economic development. The NARDL bound test indicates evidence of co-integration between the variables used in the model. The results show that FDI has asymmetric effect on economic development in Pakistan, with positive shocks having a significant and positive effect on economic development in the long run and short run. While negative shocks in FDI has adverse influence on economic development. Similarly, human capital is found to have asymmetric effect on economic development, with increases in human capital having a positive and significant impact on economic development, while decreases in human capital have a negative and significant impact. In the long run labor force and natural resources have positive and significant relationship with economic development, but in the short run it is negative and significant link with economic development. In the last, this study recommended policies that the government encourages spill-over effect and diversify FDI to reduce dependence on a single sector, develop high-skilled workers by invest in education and training, increase flexibility and reduce rigidities in labor market, encourage entrepreneurship, implement sustainable management practices, invest in infrastructure and logistic to improve the efficiency of natural resources.
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