Socio-Economic Challenges for Human Capital Development in Chile and Nigeria: A View Through the Perspective of Natural Resource Rents, Economic Growth, Foreign Direct Investment and Inflation

This paper investigates the long-run and short-run effects of natural resource rents, economic growth, foreign direct investment, and inflation on human capital development in Chile and Nigeria. The paper employs the autoregressive distributed lag bounds testing approach, using annual data from 1980 to 2019 sourced primarily from the World Bank’s World Development Indicators and the Federal Reserve Economic Data. Human capital is proxied by the Human Capital Index. The findings reveal striking contrasts between the two countries. In Chile, resource rents and economic growth exert small but positive effects on human capital, consistent with a modest resource-blessing dynamic, while foreign direct investment and inflation are largely insignificant. In Nigeria, resource rents and GDP growth undermine human capital in the long run, confirming a resource-curse pattern, while foreign direct investment emerges as strongly positive in the long run but negative in the short run. Inflation is found to be consistently detrimental in both horizons, with far greater magnitude in Nigeria. Error correction terms confirm cointegration, with Chile exhibiting a faster speed of adjustment compared to Nigeria. The results highlight that the impact of resource rents on human capital is mediated by institutional quality, fiscal frameworks, and macroeconomic stability. Policy implications point to the importance of transparent resource revenue management, economic diversification, inflation control, and the strategic direction of foreign direct investment to ensure that resource wealth supports human capital accumulation.