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Inward foreign direct investment and inclusiveness of growth: will renewable energy consumption make a difference?

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  • Khadijah Iddrisu

    (Simon Diedong Dombo University of Business and Integrated Development Studies)

  • Isaac Ofoeda

    (University of Professional Studies)

  • Joshua Yindenaba Abor

    (University of Ghana Business School)

Abstract

In an effort to achieve shared prosperity or inclusive growth, we investigate whether increasing foreign direct investment (FDI) flows to Africa can foster sustainable development (inclusive growth). Additionally, as the region is endowed with renewable energy, we examine whether renewable energy consumption can directly enhance inclusive growth and (or) complement FDI to enhance inclusive growth. Using 30 Sub-Saharan Africa (SSA) for 21years for the period of 2000–2020, our Generalized Method of Moment (GMM) results suggest that FDI is inclusive growth-enhancing, whereas renewable energy hampers inclusive growth. The high cost of renewable energy technologies in developing countries, such as SSA, has led to low investment in these resources, thereby explaining how renewable energy hampers inclusive growth. However, renewable energy consumption is effective in promoting the impact of FDI on inclusive growth in SSA. This is attributed to the investment opportunities in renewable energy consumption in SSA, thereby attracting foreign investors. Globally, renewable energy received about $85.2 billion in FDI in 2022, promoting job creation, revenue growth, and affordable energy access. We suggest that policymakers should attract sufficient FDI because higher levels of FDI promote inclusive growth.

Suggested Citation

  • Khadijah Iddrisu & Isaac Ofoeda & Joshua Yindenaba Abor, 2023. "Inward foreign direct investment and inclusiveness of growth: will renewable energy consumption make a difference?," International Economics and Economic Policy, Springer, vol. 20(3), pages 367-388, July.
    • Handle: RePEc:kap:iecepo:v:20:y:2023:i:3:d:10.1007_s10368-023-00562-z
    DOI: 10.1007/s10368-023-00562-z
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    More about this item

    Keywords

    FDI; Inclusive growth; Renewable energy; GMM; SSA; AfCFTA;
    All these keywords.

    JEL classification:

    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
    • F6 - International Economics - - Economic Impacts of Globalization
    • F15 - International Economics - - Trade - - - Economic Integration

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