Unraveling Corruption in South Asia: The Role of Human Capital, Foreign Direct Investment and Economic Growth

Abstract

This study examines the degree of corruption in relation to human capital, foreign direct investment (FDI), and economic growth in the context of five selected South Asian economies; Pakistan, India, Bangladesh, Sri Lanka, and Nepal. The study data covers the time span of twenty-five years, from 1999 to 2023. Panel data analysis is employed to examine the relationship between corruption, human capital, foreign direct investment, and economic growth. For the empirical analysis, the Pooled Mean Group (PMG) estimator issued. The study findings reveal that enhanced human capital and economic expansion significantly elevate the level of corruption in these countries. In addition, the negative coefficient values of FDI exhibits a mitigating effect on corruption, indicating its potential role as a deterrent in the South Asian region, particularly in the selected countries. Resultantly, this study recommends that these developing economies raise the volume of FDI to address the issue of rampant corruption in their geographical region. Moreover, authorities in these countries ought to devise strategies and design policies to mitigate the level of corruption associated with human capital, FDI influx, and economic growth.