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Private and public investment in sub-Saharan Africa: The role of instability risks

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  • Ouédraogo, Rasmané
  • Sawadogo, Relwendé
  • Sawadogo, Hamidou

Abstract

This paper explores the impact of public investment on private investment in sub-Saharan Africa using the finite mixture model. We argue that the impact of public investment on private investment differs across groups of countries with similar but unobserved characteristics. Contrary to previous studies, the paper incorporates the potential presence of hidden heterogeneity and tries to explain the group membership. Using a sample of 42 countries, we find that the impact of public investment on private investment differs across three different groups of countries. Moreover, we find that countries with high risk of conflict, terrorism and repatriation of profits are less likely to be in the group where public investment crowds in private investment. The paper underscores the need for sub-Saharan African countries to ensure private investment security by reducing the risks associated with conflicts and terrorism, and preserving contract viability and repatriation of profits.

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  • Ouédraogo, Rasmané & Sawadogo, Relwendé & Sawadogo, Hamidou, 2020. "Private and public investment in sub-Saharan Africa: The role of instability risks," Economic Systems, Elsevier, vol. 44(2).
    • Handle: RePEc:eee:ecosys:v:44:y:2020:i:2:s0939362518304047
    DOI: 10.1016/j.ecosys.2020.100787
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    Cited by:

    1. Sawadogo, Relwendé & Semedo, Gervasio, 2021. "Financial inclusion, income inequality, and institutions in sub-Saharan Africa: Identifying cross-country inequality regimes," International Economics, Elsevier, vol. 167(C), pages 15-28.
    2. Hermann Ndoya & Simplice A. Asongu, 2022. "Digital divide, globalization and income inequality in sub-Saharan African countries: analysing cross-country heterogeneity," Social Responsibility Journal, Emerald Group Publishing Limited, vol. 20(1), pages 1-19, October.
    3. Murshed, Muntasir & Ahmed, Rizwan & Al-Tal, Raad Mahmoud & Kumpamool, Chamaiporn & Vetchagool, Witchulada & Avarado, Rafael, 2023. "Determinants of financial inclusion in South Asia: The moderating and mediating roles of internal conflict settlement," Research in International Business and Finance, Elsevier, vol. 64(C).
    4. Essossinam Ali & Nimonka Bayale, 2024. "Impact of Public Agricultural Investment on Crops Production, Households’ Welfare, and Employment Generation Opportunities in Togo, West Africa," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 36(1), pages 161-193, February.

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    More about this item

    Keywords

    Sub-Saharan Africa; Private investment; Public investment; Finite mixture model;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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