Analyzing the interactions between economic growth, renewable energy, and human capital in Saudi Arabia

A nation's economic growth is influenced by several factors, such as natural resources, human capital, technology, and social and political conditions. The interactions among these factors are often complex and not well understood. This study examines the relationship between renewable energy, economic growth, and human capital in Saudi Arabia from 1990 to 2019. Using the Autoregressive Distributed Lag (ARDL) model and Granger causality tests, the research investigates both short-term and long-term connections among these variables. Energy consumption and foreign direct investment (FDI) are included as control variables. The ARDL bounds test confirms a long-term relationship among renewable energy use, economic growth, and human capital. The results show that human capital and FDI have a negative effect on gross domestic product (GDP), suggesting that GDP growth in Saudi Arabia is not closely linked to FDI inflows. In contrast, economic growth positively affects energy consumption. Granger causality tests reveal a one-way short-term causal relationship from FDI and energy use to GDP, and from the Human Capital Index to energy use. A two-way causal relationship is also found between GDP and the Human Capital Index, indicating mutual influence. This study provides new insights into Saudi Arabia’s economic transition by connecting traditional growth factors with sustainable development. The findings can help guide policy decisions aimed at promoting long-term growth while supporting environmental sustainability.