Template-type: ReDIF-Paper 1.0
Author-Name: Wako, Hassen Abda
Author-Email: wako@merit.unu.edu
Author-Workplace-Name: UNU-MERIT
Title: Foreign direct investment in sub-Saharan Africa: Beyond its growth effect
Abstract: This study relates Foreign Direct Investment (FDI) to economic growth, 
	 institutional quality and manufacturing value added. To this end, it 
	 uses dynamic panel data techniques that allow for parameter 
	 heterogeneity and possible non-stationarity in the series. The results 
	 confirm that economic growth, institutional quality, and natural 
	 resources, each play a positive role in attracting FDI. Besides, 
	 institutional quality is not an 'environmental variable' that simply 
	 determines economic growth and FDI inflows; it is itself affected both of 
	 these variables. Specifically, economic growth enhances institutional 
	 quality, whereas FDI appears to raise corruption and undermine the rule 
	 of law and accountability. The evidence found also reveals the existence 
	 of 'institutional' resource curse - emanating from both natural 
	 resources and FDI. Furthermore, FDI has contributed to the 'premature' 
	 deindustrialisation of the region, except in a few cases where it is 
	 non-resource-seeking. While most of these results are in agreement with 
	 some previous studies, the study also identifies detrimental 
	 institutional and deindustrialising effects of FDI which have hitherto 
	 been overlooked. A policy implication is that countries should be 
	 selective on the type of FDI they try to attract by weighing its 
	 positive growth effect against its deindustrialising and adverse 
	 institutional effects.
Classification-JEL: F21, F23, O14, O43
Keywords: FDI, foreign investment, direct investment, Economic Growth, Institutions,
	 Deindustrialisation, sub-Saharan Africa
Series: UNU-MERIT Working Papers
Creation-Date: 20180223
Number: 2018-013
File-URL: https://unu-merit.nl/publications/wppdf/2018/wp2018-013.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2018013