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Effect of foreign direct investment on structural transformation in West African Economic and Monetary Union (WAEMU) countries

Author

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  • Essotanam Mamba
  • Moukpè Gniniguè
  • Essossinam Ali
  • Aviral Tiwari

Abstract

Foreign Direct Investment (FDI) is widely recognized as an engine of the structural transformation in development theories. We analyzed the effects of FDI on the structural transformation in West African Economic and Monetary Union (WAEMU) countries by considering the industry, manufacturing, agricultural, and services sectors for the period spanning from 1990 to 2017. Using the Panel Corrected Standard Errors (PCSE) estimation technique, we showed the neutrality hypothesis of FDI inflows on industrial, manufacturing and agricultural productivity in the WAEMU region. However, findings showed positive effect of FDI inflows on services sector’s productivity. We also found that domestic credit was not an important determinant for structural transformation in WAEMU countries, except for the services sector. Moreover, findings showed that the institutional quality indicator is relatively low in WAEMU region and has negative relationship with agricultural productivity, while it increases services sector’s value added. These results imply that the low institutional quality in WAEMU may lead to the failure in the design and implementation of reliable agricultural policies of the region which may not attract the FDI, resulting in the negative effect of FDI on structural transformation in the region. Rethinking about the design and implementation of domestic development policies and promoting actions that can attract FDI in sectors with positive ripple effects, including industry, manufacturing, agriculture and services sectors are recommended for the structural transformation of the economy of WAEMU countries.

Suggested Citation

  • Essotanam Mamba & Moukpè Gniniguè & Essossinam Ali & Aviral Tiwari, 2020. "Effect of foreign direct investment on structural transformation in West African Economic and Monetary Union (WAEMU) countries," Cogent Economics & Finance, Taylor & Francis Journals, vol. 8(1), pages 1783910-178, January.
    • Handle: RePEc:taf:oaefxx:v:8:y:2020:i:1:p:1783910
    DOI: 10.1080/23322039.2020.1783910
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    Citations

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    Cited by:

    1. Fotio, Herve Kaffo & Nchofoung, Tii N. & Asongu, Simplice A., 2022. "Financing renewable energy generation in SSA: Does financial integration matter?," Renewable Energy, Elsevier, vol. 201(P2), pages 47-59.
    2. Simplice A. Asongu & Joel Hinaunye Eita, 2023. "Promoting renewable energy consumption in Sub-Saharan Africa: how capital flight crowds-out the favorable effect of foreign aid," Working Papers of the African Governance and Development Institute. 23/048, African Governance and Development Institute..
    3. Mamba, Essotanam & Ali, Essossinam, 2022. "Do agricultural exports enhance agricultural (economic) growth? Lessons from ECOWAS countries," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 257-267.
    4. Essotanam Mamba & Afi Balaki, 2023. "Deep regional trade agreement as a driver for global value chains in Africa: the case of ECOWAS region," Economic Change and Restructuring, Springer, vol. 56(3), pages 2037-2068, June.
    5. Gniniguè, Moukpè & Awade, Essossolim, 2023. "Diaspora as Driver of Agricultural Structural Transformation in West Africa," African Journal of Economic Review, African Journal of Economic Review, vol. 11(3), June.
    6. Gniniguè, Moukpè & Abalo, Bidé Félicité Awoki & Paroubénim, Tchilalo & Heyou, Méhèza Reine, 2022. "The Impact of Agricultural Structural Transformation on Economic Growth in Africa," African Journal of Economic Review, African Journal of Economic Review, vol. 10(2), March.
    7. Rashid, Furaha N. & Mwenda, Beny B. & Tengaa, Peter E., 2023. "Bridging Borders, Nourishing Nations: The Impact of Foreign Direct Investment on Tanzania's Cereal Yield," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 11(4), October.
    8. Essotanam Mamba & Afi Balaki, 2022. "Effects of trade policies on external trade performances of ECOWAS countries (1996–2017)†," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 30(3), pages 535-566, July.

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