Sustainable Economic Dynamics in Europe: Confirming the Role of Structural Intellectual Capital Using PCA, Panel ARDL, PSTR and SEM-PLS Models

This study examines the influence of social capital, intellectual capital, resource rents, and investment capital on the economic performance of the 18 member states of the European Union from 2005 to 2022. Principal component analysis and factor analysis are employed to construct composite measures of social and intellectual capital. The empirical model integrates static panel estimations with Monte Carlo simulations and Panel Smooth Transition Regression (PSTR) to examine nonlinear and regime-dependent growth functions. Investment capital exerts a greater influence on growth when intellectual capital is above a certain threshold, but social capital and resource rents exhibit diverse effects across various regimes; this is consistent with semi-endogenous growth models. In regimes with low intellectual capital, resource rents adversely influence growth, consistent with the resource curse concept; however, this effect diminishes as intellectual capital rises. Finally, partial least squares structural equation modeling indicates that social capital, investment capital, and resource rents influence economic growth, with this effect mediated by intellectual capital. The findings underscore the necessity for the European Union to cultivate and enhance knowledge-based assets while reducing reliance on resource rents to achieve more resilient and sustainable economic development.