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The effects of Foreign Direct Investment on The Human Development Index: Analysis of different Income Level Group Countries

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  • Thy Le-Bao
  • Han Nguyen-Huynh-Bao
  • Thi Nguyen-Thi-Thanh

Abstract

This study investigated the determinants of human development across different income groups, including high-income, upper-middle-income, lower-middle-income, and low-income countries, using balanced panel data from 217 nations covering the period from 2000 to 2022. Employing the dynamic system Generalized Method of Moments to mitigate the heteroskedasticity and autocorrelation issues, our findings found that FDI significantly boosts the Human Development Index (HDI) across high-income, upper-middle, and low-income groups, driven by job creation and technical progress. Other factors exhibited diverse impacts across different income group levels: trade openness and poverty negatively correlated with HDI, while unemployment and inflation showed mixed effects. Conversely, population and economic growth consistently improved HDI. Based on these findings, countries should prioritize FDI-friendly policies that not only attract investment but also promote inclusive and sustainable human development, carefully balancing potential benefits and costs.

Suggested Citation

  • Thy Le-Bao & Han Nguyen-Huynh-Bao & Thi Nguyen-Thi-Thanh, 2025. "The effects of Foreign Direct Investment on The Human Development Index: Analysis of different Income Level Group Countries," SAGE Open, , vol. 15(3), pages 21582440251, September.
    • Handle: RePEc:sae:sagope:v:15:y:2025:i:3:p:21582440251379216
    DOI: 10.1177/21582440251379216
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