Abstract

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Symmetry: Culture and Science
Volume 33, Number 4, pages 327-346 (2022)
https://doi.org/10.26830/symmetry_2022_4_327

DOES FOREIGN DIRECT INVESTMENT MATTER IN THE ASYMMETRIC RELATIONSHIP BETWEEN ECONOMIC GROWTH AND HUMAN CAPITAL? EVIDENCE FROM PANEL SMOOTH TRANSITION REGRESSION ANALYSIS

Celil Aydin^1* Hatice Aydin² Yagmur Cetintas³

¹ Assoc. Prof., Department of Economics, Bandırma Onyedi Eylül University, Bandırma, Balıkesir, Turkey.
Email: caydin@bandirma.edu.tr
ORCID: 0000-0002-0398-9884

² Assoc. Prof., Ömer Seyfettin Faculty of Applied Sciences, Bandırma Onyedi Eylül University, Bandırma, Balıkesir, Turkey.
Email: haydin@bandirma.edu.tr
ORCID: 0000-0002-5581-7216

³ Graduate Student. Bandırma Onyedi Eylül University, Bandırma, Balıkesir, Turkey
Email: yagmurcetintas@ogr.bandirma.edu.tr
ORCID: 0000-0003-0741-5578

^* corresponding author

Abstract: This study examines the role of foreign direct investment in the asymmetric relationship between human capital and economic growth in Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Lithuania, Latvia, Poland, Romania, Slovakia, and Slovenia, which are called transition economies. The relationship between the variables was analyzed for the period 1995-2019 using the Panel Smooth Transition Regression (PSTR) model. In the analysis results, the value of the threshold variable determined as the share of foreign direct investment in GDP was found to be 0.27. In this context, when the share of foreign direct investment in GDP is below the threshold level, foreign direct investments in human capital gradually affect economic growth. In the case where it is above the threshold level, the effect of human capital on economic growth is greater with the acquisition of sufficient human capital stock, the provision of a qualified workforce, and the advancement of factors such as technological development. Therefore, it is a solution for countries to attract foreign direct investments in order to increase human capital accumulation. Accordingly, policymakers need to provide the necessary conditions for attracting foreign capital.

Keywords: Panel Smooth Transition Regression Model, Economic Growth, Human Capital, Foreign Direct Investment.

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