THE IMPACT OF FOREIGN DIRECT INVESTMENT INFLOWS AND TRADE LIBERALIZATION ON HUMAN CAPITAL DEVELOPMENT IN EU TRANSITION ECONOMIES
THE IMPACT OF FOREIGN DIRECT INVESTMENT INFLOWS AND TRADE LIBERALIZATION ON HUMAN CAPITAL DEVELOPMENT IN EU TRANSITION ECONOMIES

Summary/Abstract: The globalization process gained acceleration as of 1980s and the barriers over flows of goods, services, and capital were reduced gradually by many countries. The aforementioned developments caused the considerable increases in foreign direct investments which became a significant external financing instrument especially for developing and emerging economies. In this context, the economic and non-economic effects of both foreign direct investments and trade liberalization have been researched extensively in the related literature. Given the related literature, the study explores the effect of foreign direct investment inflows and trade liberalization, two featured characteristics of the globalized world, on human capital development in 11 EU transition countries for the period of 1995-2018 through panel regression analysis. The regression analysis revealed that the impact of FDI inflows on human capital development was negative, while trade liberalization positively affected the human capital development. However, the magnitude of the both variables’ impact was found to be very weak.

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