The Geography of Growth: Regional Disparities and the Human Capital-FDI Nexus in Europe
The Geography of Growth: Regional Disparities and the Human Capital-FDI Nexus in Europe

Summary/Abstract: This study investigates the impact of Foreign Direct Investment (FDI) on economic growth across diverse European regions from 2000 to 2023. The analysis into Northern, Central/Eastern, and Southern Europe, the research identifies how structural and socio-economic disparities moderate the FDI-growth relationship. Utilizing Panel Least Squares and Panel EGLS regression models, the findings indicate a robust positive correlation between FDI and GDP growth in Northern and Central/Eastern Europe, while revealing a statistically insignificant impact in the Southern region. A central contribution of the paper is the identification of a "Human Capital Threshold," demonstrating that higher education levels significantly amplify the positive spillovers of FDI. The results suggest that for transitional and emerging European economies, investment in human capital is a prerequisite for translating foreign capital inflows into sustainable economic development. The study provides a regional roadmap for structural reforms aimed at enhancing investment absorptive capacity.

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