Mediated Moderation Analysis in the Nexus of Investment in Human Capital and the Green Economy

Abstract

Purpose – The purpose of this paper is to analyze the mediated moderation role of foreign direct investment inflows (FDI), along with technological innovation (TI), in the relationship between investment in human capital (IHC) and the green economy, which is often ignored in current literature. Design/Methodology/Approach – In order to estimate the mediated moderating effect of TI and FDI on the nexus of IHC and the green economy, we use principle component analysis (PCA) to create a green economy index (GEI) by first selecting 15 relevant variables. Furtherly, the data analyzed covers 33 OECD nations from 2005 to 2018 using a Generalized Method of Moments (GMM) model. Findings – This paper demonstrates that while FDI positively moderates the relationship between IHC and the green economy, the positive role of FDI can be hindered by TI as a mediating variable in OECD countries. The empirical result reveals a U-shaped association between IHC and the green economy. Moreover, we also explain the joint effect of FDI and IHC on TI in OECD countries. FDI shows a negative role in the impact of IHC on TI. Research Implications – This paper puts forward dialectical thinking to view the impact of human capital investment on the green economy, and suggests that governments should view role of IHC in the green economy dialectically, plus adequately utilize its promotional role to address associated risks. The findings can support decision makers in how to use IHC precisely to achieve the goal of sustainable development.