The effect of foreign direct investment on growth in Sub-Saharan Africa

Content Provider	Semantic Scholar
Author	Juma, Mary-Ann
Copyright Year	2012
Abstract	Many studies have attempted to estimate the impact of foreign direct investment (FDI) on growth around the world, but very few have focused on Sub-Saharan Africa. Accordingly, this thesis explores the effect of FDI on economic growth in the region, using data from 43 countries over the period 1980-2009. I employ ordinary least squares regressions with country fixed effects to answer my primary research question, using real GDP growth as the dependent variable and gross FDI inflows as a percentage of GDP as the key explanatory variable. My regressions control for time-variant characteristics across the countries in my sample, such as terms of trade, trade openness, and government expenditure. All variables are averaged over non-overlapping three-year intervals to reduce business cycle effects, and FDI is lagged to address endogeneity. My results indicate that FDI is associated with higher growth in Sub-Saharan Africa, particularly after the exclusion of outliers. I test for a difference in the effect of FDI on growth in mineral-rich versus mineral-poor countries, and do not find that there is a statistically significant difference between the two sets of countries. For robustness, I repeat my analysis on five-year averaged data, and find these results to be consistent with those found using the triennial data. Thus, I conclude that FDI has had a positive effect on growth in Sub-Saharan Africa, and that African policy makers are justified in seeking FDI as a way to accelerate growth in the future.
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Alternate Webpage(s)	https://www.amherst.edu/media/view/434456/original/Juma,%20Mary-Ann%20Thesis.pdf
Language	English
Access Restriction	Open
Content Type	Text
Resource Type	Article