Abstract:
The study examines the impact of foreign direct investment, human capital, and
financial development on labor productivity, utilizing data from 2000 to 2019 and panel data
from 180 economies. The estimation technique used in the study is GMM, which helps to solve
the problems of endogeneity and unobserved heterogeneity. The findings indicate that foreign
direct investment, human capital, and financial development have a positive and significant
relationship with labor productivity. The square term of human capital also shows a positive
relationship with labor productivity, indicating increasing returns. This study contributes to
the literature by examining the roles of structural and financial factors using robust techniques.
Furthermore, the study’s results offer important policy recommendations, suggesting that the
government should invest in projects to develop education and financial infrastructure to
achieve high productivity gains.
