A qualitative and quantitative approach to the drivers of economic growth in the EU

Abstract

This study assesses the effects of human capital (focusing on highly educated immigrants), knowledge creation, and global governance quality on economic output (proxied by gross domestic product [GDP] per capita) for EU member states between 2000 and 2020. First, we use a qualitative approach to emphasise the connections between GDP per capita and various determinants of economic growth by performing a social network analysis [SNA]. The results reveal that the three most important features of each network are a high GDP per capita, governance quality, and human capital endowment (low scenario, respectively). Second, we use quantitative data with which we run different econometric models, such as robust regression analysis, generalised method of moments (addressing endogeneity issues), and structural equation modelling. We find that all the regressors have a significant influence on GDP per capita, with the greatest magnitude exercised by tertiary-educated immigrants (valuable resources acquired by destination countries), followed by knowledge and governance quality indicators. These results remain robust to several changes in the empirical estimation techniques.