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Public Governance, Health and Foreign Direct Investment in Sub-Saharan Africa

  • Desbordes, Rodolphe
  • Azémar, Céline

In this paper we diverge from the existing empirical literature on FDI determinants in two ways. First, we decompose the sources of the foreign direct investment (FDI) gap between Sub-Saharan Africa (SSA) and other developing regions. Once market size has been accounted for, we nd that SSA's FDI de cit is mostly explained by insufficient provision of public goods: low human capital accumulation, especially health, in SSA explains 100-140% of the inter-regional FDI gaps. Second, we estimate the indirect effect of infectious diseases on FDI through their direct impact on health. We find that a 1% point rise in HIV prevalence in the adult population is associated with a decrease in net FDI inflows of 3.5%, while a country in which 100% of the population is at risk of contracting deadly malaria receives about 16% less FDI than a similar country located in a malaria-free region.

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File URL: http://hdl.handle.net/10943/36
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Paper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2008-23.

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Date of creation: 2008
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Handle: RePEc:edn:sirdps:36
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