Achieving sustainable development in Sub‐Saharan Africa: Do human capital and foreign direct investment matter?

Abstract

Abstract Over the past few decades, there has been a noticeable development of interest among scholars and policymakers worldwide regarding the prominent drivers of sustainable development. The role of human capital and foreign direct investment (FDI) in fostering sustainable development, however, has been largely neglected by policymakers and scholars, despite recent emphasis on FDI amidst current economic performance worldwide, particularly in developing countries. This study empirically investigates the effect of human capital and FDI on sustainable development in sub‐Saharan Africa (SSA) spanning 1991–2021. The empirical analysis was implemented by deploying different techniques, such as feasible generalized least squares, panel corrected standard errors, and Lewbel two‐stage least square techniques, with the panel quantile regression approach as a robustness check. The empirical outcomes show that improvement in human capital via educational attainment fosters economic expansion, employment opportunities, and poverty reduction, whereas an increase in health human capital undermines sustainable development in SSA. The findings also reveal that increasing FDI flows to priority sectors in the region are critical for enhancing human capital, thus stimulating economic performance, job opportunities, and poverty alleviation in SSA. This study puts forward important policy implications for achieving sustainable development.