TY - JOUR
T1 - Foreign Direct Investment and Economic Growth in SSA
T2 - The Role of Institutions
AU - Agbloyor, Elikplimi Komla
AU - Gyeke-Dako, Agyapomaa
AU - Kuipo, Ransome
AU - Abor, Joshua Yindenaba
N1 - Publisher Copyright:
© 2016 Wiley Periodicals, Inc.
PY - 2016/9/1
Y1 - 2016/9/1
N2 - This article examines the relationship among foreign direct investment (FDI), institutions and economic growth in sub-Saharan Africa in different country environs. We employ a two-step generalized methods of moments estimator with Weidmeijer corrected standard errors and orthogonal deviations to examine the empirical relations. In the full sample, we do not find evidence that FDI promotes growth. We also do not find a significant relationship between institutions and economic growth. Finally, we do not find convincing evidence that institutions alter favorably the effect of FDI on economic growth. In the subsample that excludes countries with developed financial markets, again we do not find a significant relation between FDI and economic growth. However, we find evidence suggesting that institutions play a direct role in spurring economic growth. Further, the quality of institutions seems to alter favorably the relationship between FDI and economic growth. Finally, in the sample that excludes countries with abundant natural resources, we find a direct and positive relationship between FDI and economic growth. We also find a direct relationship between institutions and economic growth. The growth-enhancing effects of FDI, however, seem to reduce as the quality of institutions improves. The major implication from our study is that countries should take into consideration their own realities when they fashion policies to benefit from FDI in terms of achieving better growth outcomes.
AB - This article examines the relationship among foreign direct investment (FDI), institutions and economic growth in sub-Saharan Africa in different country environs. We employ a two-step generalized methods of moments estimator with Weidmeijer corrected standard errors and orthogonal deviations to examine the empirical relations. In the full sample, we do not find evidence that FDI promotes growth. We also do not find a significant relationship between institutions and economic growth. Finally, we do not find convincing evidence that institutions alter favorably the effect of FDI on economic growth. In the subsample that excludes countries with developed financial markets, again we do not find a significant relation between FDI and economic growth. However, we find evidence suggesting that institutions play a direct role in spurring economic growth. Further, the quality of institutions seems to alter favorably the relationship between FDI and economic growth. Finally, in the sample that excludes countries with abundant natural resources, we find a direct and positive relationship between FDI and economic growth. We also find a direct relationship between institutions and economic growth. The growth-enhancing effects of FDI, however, seem to reduce as the quality of institutions improves. The major implication from our study is that countries should take into consideration their own realities when they fashion policies to benefit from FDI in terms of achieving better growth outcomes.
KW - Economic Growth
KW - Foreign Direct Invest
KW - Institutions
KW - Sub-Saharan Africa
UR - http://www.scopus.com/inward/record.url?scp=84959291092&partnerID=8YFLogxK
U2 - 10.1002/tie.21791
DO - 10.1002/tie.21791
M3 - Article
AN - SCOPUS:84959291092
SN - 1096-4762
VL - 58
SP - 479
EP - 497
JO - Thunderbird International Business Review
JF - Thunderbird International Business Review
IS - 5
ER -