• Samina Sabir
  • M. Shamshir
  • Saima Qureshi
Keywords: FDI, Human capital., nfrastructure, infrastructure, institutions, trade openness, technology


The absorptive capacity (AC) is very important determinant of foreign direct investment (FDI) more effective for economic growth and development. There are numerous indicators of absorptive capacity such as human capital, technology, infrastructure, institutional quality, GDP per capita, and trade openness. This study determines the effect of absorptive capacity on FDI in South Asian countries over the period 1984-2017 using System Generalized Method of Moment (GMM). The study reveals that absorptive indicators such as trade openness, infrastructure, institutional quality, human capital, gross domestic product per capita, and technology have increasing impacts on foreign direct investment in South Asian countries. However human capital is the more effective determinant of FDI compared to other determinants. It is necessary to increase human capital, free trade, infrastructure, technological innovations, and institutional quality to effectively absorb the benefit and spillover effects of FDI which boosts economic growth and development.

Author Biographies

Samina Sabir
Assistant Professor, Kashmir Institute of Economics, The University of Azad Jammu and Kashmir, Muzaffarabad
M. Shamshir
Associate Professor, Management Sciences, Hamdard University Karachi
Saima Qureshi
Lecturer, Kashmir Institute of Economics, The University of Azad Jammu and Kashmir, Muzaffarabad


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