Capital Formation, Technological Diffusion and Economic Growth in Nigeria: An ARDL Bound Testing Analysis

Abstract

This study examines the impact of human capital on economic growth in Nigeria from 19 ... to 20 through the application of Auto-Regressive Distributed Lag (ARDL) Bound Testing methodology. The study is based on the Benhabib and Spiegel (1994) model of technology diffusion which assumed a Cobb-Douglas production functions.  While positive relation were found between all forms of capital formation and economic growth except secondary enrolment, the result from the interacting role of FDI  and domestic investment appears positive indicating substituting relationship. This indicates that foreign investment is gradually substituting domestic investment which can be detrimental to the Nigeria Economic growth in the long run. Redirection and optimal combination between FDI and domestic investment is therefore suggested for long run economic growth in Nigeria.  The results have been found robust concerning data issues and series stability.

JEL Code: I20, C22, C51, O56

Keywords: Capital Formation, Technological Diffusion, ARDL Bound Testing, Economic Growth, Nigeria.