Foreign Capital Flows and the Efficiency of the HDI Dimensions

Abstract

This paper examines the impact of the various types of foreign capital flows (or FCF) on the efficiency with which countries transform their respective resources into the achievements associated with the three dimensions (Life expectancy or LI, Educational attainment or EI and wealth or WI) of the Human Development Index. An important result is the identification of returns to scale as the main factor preventing some countries from achieving the total efficiency level assumed by standard economic analysis, if decision-making units (DMUs) or countries in this case, working along their respective production possibility frontiers, wish achieve the goal of optimizing the utilization of their resources.