IDEAS home Printed from https://ideas.repec.org/p/gla/glaewp/2009_04.html
   My bibliography  Save this paper

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

Author

Listed:
  • Céline Azémar
  • Rodolphe Desbordes

Abstract

Using 1985-2004 yearly panel data for 70 developing countries, including 28 from Sub-Saharan Africa (SSA), the paper finds that once market size is accounted for, SSA's FDI deficit with other regions of the world is mainly explained by the insufficient provision of public goods: relatively low human capital accumulation, in terms of education and health in SSA. Based on additional cross-sectional data, the paper finds that in the absence of HIV and malaria, net FDI inflows in the median SSA country could have been one-third higher during 2000-2004, with slightly more than one-half of this deficit explained by malaria.

Suggested Citation

  • Céline Azémar & Rodolphe Desbordes, 2008. "Public Governance, Health and Foreign Direct Investment in Sub-Saharan Africa," Working Papers 2009_04, Business School - Economics, University of Glasgow.
  • Handle: RePEc:gla:glaewp:2009_04
    as

    Download full text from publisher

    File URL: http://www.gla.ac.uk/media/media_107181_en.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Philipp Harms & Heinrich W. Ursprung, 2002. "Do Civil and Political Repression Really Boost Foreign Direct Investments?," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 651-663, October.
    2. John Strauss & Duncan Thomas, 1998. "Health, Nutrition, and Economic Development," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 766-817, June.
    3. David L. Carr & James R. Markusen & Keith E. Maskus, 2001. "Estimating the Knowledge-Capital Model of the Multinational Enterprise," American Economic Review, American Economic Association, vol. 91(3), pages 693-708, June.
    4. Shang-Jin Wei, 2000. "Natural openness and good government," Policy Research Working Paper Series 2411, The World Bank.
    5. Young Seok Ahn & Slamet Seno Adji & Thomas Willett, 1998. "The Effects of Inflation and Exchange Rate Policies on Direct Investment to Developing Countries," International Economic Journal, Taylor & Francis Journals, vol. 12(1), pages 95-104.
    6. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    7. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, January.
    8. Dupasquier, Chantal & Osakwe, Patrick N., 2006. "Foreign direct investment in Africa: Performance, challenges, and responsibilities," Journal of Asian Economics, Elsevier, vol. 17(2), pages 241-260, April.
    9. Robert E. Lipsey, 2001. "Foreign Direct Investment and the Operations of Multinational Firms: Concepts, History, and Data," NBER Working Papers 8665, National Bureau of Economic Research, Inc.
    10. Amar A. Hamoudi & Jeffrey D. Sachs, 1999. "Economic Consequences of Health Status: A Review of the Evidence," CID Working Papers 30, Center for International Development at Harvard University.
    11. Jan Willem Gunning & Paul Collier, 1999. "Explaining African Economic Performance," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 64-111, March.
    12. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1203-1250.
    13. V N Balasubramanyam & D Sapsford & M A Salisu, "undated". "Foreign Direct Investment and Growth," Working Papers ec13/94, Department of Economics, University of Lancaster.
    14. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
    15. Witold J. Henisz, 2002. "The institutional environment for infrastructure investment," Industrial and Corporate Change, Oxford University Press, vol. 11(2), pages 355-389.
    16. David E. Bloom & Jeffrey D. Sachs, 1998. "Geography, Demography, and Economic Growth in Africa," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 207-296.
    17. Agnès Bénassy-Quéré & Maylis Coupet & Thierry Mayer, 2007. "Institutional Determinants of Foreign Direct Investment," The World Economy, Wiley Blackwell, vol. 30(5), pages 764-782, May.
    18. Daniel Cohen & Marcelo Soto, 2007. "Growth and human capital: good data, good results," Journal of Economic Growth, Springer, vol. 12(1), pages 51-76, March.
    19. Dani Rodrik, 2000. "Institutions for High-Quality Growth: What They are and How to Acquire Them," NBER Working Papers 7540, National Bureau of Economic Research, Inc.
    20. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-563, July.
    21. Daniel Kaufmann & Aart Kraay, 2002. "Growth without Governance," ECONOMIA JOURNAL, THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION - LACEA, vol. 0(Fall 2002), pages 169-230, August.
    22. Noorbakhsh, Farhad & Paloni, Alberto & Youssef, Ali, 2001. "Human Capital and FDI Inflows to Developing Countries: New Empirical Evidence," World Development, Elsevier, vol. 29(9), pages 1593-1610, September.
    23. Chen Chunlai, 1997. "The Location Determinants of Foreign Direct Investment in Developing Countries," Chinese Economies Research Centre (CERC) Working Papers 1997-12, University of Adelaide, Chinese Economies Research Centre.
    24. Theodore H. Moran & Edward M. Graham & Magnus Blomstrom, 2005. "Does Foreign Direct Investment Promote Development?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 3810.
    25. Fischer, Stanley, 1993. "The role of macroeconomic factors in growth," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 485-512, December.
    26. Wooldridge, Jeffrey M., 1995. "Selection corrections for panel data models under conditional mean independence assumptions," Journal of Econometrics, Elsevier, vol. 68(1), pages 115-132, July.
    27. R Bonnel, 2000. "HIV/AIDS and Economic Growth: A Global Perspective," South African Journal of Economics, Economic Society of South Africa, vol. 68(5), pages 360-379, December.
    28. Elizabeth Asiedu, 2006. "Foreign Direct Investment in Africa: The Role of Natural Resources, Market Size, Government Policy, Institutions and Political Instability," The World Economy, Wiley Blackwell, vol. 29(1), pages 63-77, January.
    29. Bruce A. Blonigen & Miao Wang, 2004. "Inappropriate Pooling of Wealthy and Poor Countries in Empirical FDI Studies," NBER Working Papers 10378, National Bureau of Economic Research, Inc.
    30. Steven Globerman & Daniel Shapiro, 2003. "Governance infrastructure and US foreign direct investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 34(1), pages 19-39, January.
    31. Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
    32. Fogel, Robert W, 1994. "Economic Growth, Population Theory, and Physiology: The Bearing of Long-Term Processes on the Making of Economic Policy," American Economic Review, American Economic Association, vol. 84(3), pages 369-395, June.
    33. Aizenman, Joshua & Marion, Nancy, 2004. "The merits of horizontal versus vertical FDI in the presence of uncertainty," Journal of International Economics, Elsevier, vol. 62(1), pages 125-148, January.
    34. David Cutler & Angus Deaton & Adriana Lleras-Muney, 2006. "The Determinants of Mortality," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 97-120, Summer.
    35. Eduardo Fern·ndez-Arias & Peter Montiel, 2001. "Reform and Growth in Latin America: All Pain, No Gain?," IMF Staff Papers, Palgrave Macmillan, vol. 48(3), pages 1-5.
    36. Wagner, Don & Head, Keith & Ries, John, 2002. "Immigration and the Trade of Provinces," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 507-525, December.
    37. Grossman, Michael, 2004. "The demand for health, 30 years later: a very personal retrospective and prospective reflection," Journal of Health Economics, Elsevier, vol. 23(4), pages 629-636, July.
    38. Globerman, Steven & Shapiro, Daniel, 2002. "Global Foreign Direct Investment Flows: The Role of Governance Infrastructure," World Development, Elsevier, vol. 30(11), pages 1899-1919, November.
    39. Gastanaga, Victor M. & Nugent, Jeffrey B. & Pashamova, Bistra, 1998. "Host Country Reforms and FDI Inflows: How Much Difference do they Make?," World Development, Elsevier, vol. 26(7), pages 1299-1314, July.
    40. Heitor Almeida & Daniel Ferreira, 2002. "Democracy and the Variability of Economic Performance," Economics and Politics, Wiley Blackwell, vol. 14(3), pages 225-257, November.
    41. Jo Jakobsen & Indra de Soysa, 2006. "Do Foreign Investors Punish Democracy? Theory and Empirics, 1984-2001," Kyklos, Wiley Blackwell, vol. 59(3), pages 383-410, August.
    42. repec:wsi:wschap:9789812798091_0017 is not listed on IDEAS
    43. Helene Poirson Ward & Luca A Ricci & Catherine A Pattillo, 2004. "What Are the Channels Through Which External Debt Affects Growth?," IMF Working Papers 04/15, International Monetary Fund.
    44. Stijns, Jean-Philippe, 2006. "Natural resource abundance and human capital accumulation," World Development, Elsevier, vol. 34(6), pages 1060-1083, June.
    45. Bloom, David E. & Canning, David & Sevilla, Jaypee, 2004. "The Effect of Health on Economic Growth: A Production Function Approach," World Development, Elsevier, vol. 32(1), pages 1-13, January.
    46. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 803-832, December.
    47. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2007. "The external wealth of nations mark II: Revised and extended estimates of foreign assets and liabilities, 1970-2004," Journal of International Economics, Elsevier, vol. 73(2), pages 223-250, November.
    48. Drusilla K. Brown & Alan V. Deardorff & Robert M. Stern, 2009. "The Effects of Multinational Production on Wages and Working Conditions in Developing Countries," World Scientific Book Chapters,in: Globalization And International Trade Policies, chapter 17, pages 623-687 World Scientific Publishing Co. Pte. Ltd..
    49. Alsan, Marcella & Bloom, David E. & Canning, David, 2006. "The effect of population health on foreign direct investment inflows to low- and middle-income countries," World Development, Elsevier, vol. 34(4), pages 613-630, April.
    50. Schneider, Friedrich & Frey, Bruno S., 1985. "Economic and political determinants of foreign direct investment," World Development, Elsevier, vol. 13(2), pages 161-175, February.
    51. Augustin Fosu & Robert Bates & Anke Hoeffler, 2006. "Institutions, Governance and Economic Development in Africa: An Overview," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 15(1), pages 1-9, April.
    52. Matthias Busse, 2004. "Transnational Corporations and Repression of Political Rights and Civil Liberties: An Empirical Analysis," Kyklos, Wiley Blackwell, vol. 57(1), pages 45-65, February.
    53. Marcella Alsan & David E. Bloom & David Canning, 2004. "The Effect of Population Health on Foreign Direct Investment," NBER Working Papers 10596, National Bureau of Economic Research, Inc.
    54. Lant Pritchett & Lawrence H. Summers, 1996. "Wealthier is Healthier," Journal of Human Resources, University of Wisconsin Press, vol. 31(4), pages 841-868.
    55. Asiedu, Elizabeth, 2002. "On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?," World Development, Elsevier, vol. 30(1), pages 107-119, January.
    56. Benassy-Quere, AgnEs & Fontagne, Lionel & LahrEche-Revil, Amina, 2001. "Exchange-Rate Strategies in the Competition for Attracting Foreign Direct Investment," Journal of the Japanese and International Economies, Elsevier, vol. 15(2), pages 178-198, June.
    57. David L. Carr & James R. Markusen & Keith Maskus, 2004. "Competition for Multinational Investment in Developing Countries: Human Capital, Infrastructure, and Market Size," NBER Chapters,in: Challenges to Globalization: Analyzing the Economics, pages 383-410 National Bureau of Economic Research, Inc.
    58. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
    59. James R. Markusen, 1998. "Multinational Firms, Location and Trade," The World Economy, Wiley Blackwell, vol. 21(6), pages 733-756, August.
    60. repec:wbk:wbpubs:28198 is not listed on IDEAS
    61. Reinhart, Carmen & Rogoff, Kenneth, 2002. "FDI to Africa: The role of price stability and currency instability," MPRA Paper 13872, University Library of Munich, Germany.
    62. David Bloom & David Canning, 2003. "The Health and Poverty of Nations: From theory to practice," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 4(1), pages 47-71.
    63. W. J. Henisz, 2000. "The Institutional Environment for Economic Growth," Economics and Politics, Wiley Blackwell, vol. 12(1), pages 1-31, March.
    64. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-1294, September.
    65. Paolo Mauro & Andrei A Levchenko, 2006. "Do Some Forms of Financial Flows Help Protect From Sudden Stops?," IMF Working Papers 06/202, International Monetary Fund.
    66. Yuko Kinoshita & Ashoka Mody, 2001. "Private information for foreign investment in emerging economies," Canadian Journal of Economics, Canadian Economics Association, vol. 34(2), pages 448-464, May.
    67. Chakrabarti, Avik, 2001. "The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross-Country Regressions," Kyklos, Wiley Blackwell, vol. 54(1), pages 89-113.
    68. Dean T. Jamison & Richard G. Feacham & Malegapuru W. Makgoba & Eduard R. Bos & Florence K. Baingana & Karen J. Hofman & Khama O. Rogo, 2006. "Disease and Mortality in Sub-Saharan Africa, Second Edition," World Bank Publications, The World Bank, number 7050, June.
    69. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "Democracy, Governance, and Economic Growth: Theory and Evidence," World Scientific Book Chapters,in: International Trade, Capital Flows and Economic Development, chapter 8, pages 215-248 World Scientific Publishing Co. Pte. Ltd..
    70. Keith Maskus, 1998. "The international regulation of intellectual property," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 134(2), pages 186-208, June.
    71. Canning, David, 1998. "A Database of World Stocks of Infrastructure, 1950-95," World Bank Economic Review, World Bank Group, vol. 12(3), pages 529-547, September.
    72. repec:hrv:faseco:30747160 is not listed on IDEAS
    73. Jensen, Nathan M., 2003. "Democratic Governance and Multinational Corporations: Political Regimes and Inflows of Foreign Direct Investment," International Organization, Cambridge University Press, vol. 57(03), pages 587-616, June.
    74. Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
    75. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    76. Fuchs, Victor R., 2004. "Reflections on the socio-economic correlates of health," Journal of Health Economics, Elsevier, vol. 23(4), pages 653-661, July.
    77. Eric Neumayer, 2004. "HIV/AIDS and Cross-National Convergence in Life Expectancy," Population and Development Review, The Population Council, Inc., vol. 30(4), pages 727-742.
    78. Clague, Christopher & Keefer, Philip & Knack, Stephen & Olson, Mancur, 1999. "Contract-Intensive Money: Contract Enforcement, Property Rights, and Economic Performance," Journal of Economic Growth, Springer, vol. 4(2), pages 185-211, June.
    79. Li, Quan & Resnick, Adam, 2003. "Reversal of Fortunes: Democratic Institutions and Foreign Direct Investment Inflows to Developing Countries," International Organization, Cambridge University Press, vol. 57(01), pages 175-211, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Celine Azemar & Julia Darby & Rodolphe Desbordes & Ian Wooton, 2012. "Market Familiarity and the Location of South and North MNEs," Economics and Politics, Wiley Blackwell, vol. 24(3), pages 307-345, November.
    2. Rodolphe Desbordes & Gary Koop, 2014. "The Known Unknowns of Governance," Working Paper series 38_14, Rimini Centre for Economic Analysis.
    3. Bailey, Nicholas & Li, Sali, 2015. "Cross-national Distance and FDI: The Moderating Role of Host Country Local Demand," Journal of International Management, Elsevier, vol. 21(4), pages 267-276.
    4. Darby, Julia & Desbordes, Rodolphe & Wooton, Ian, 2009. "Does Public Governance Always Matter? How Experience of Poor Institutional Quality Influences FDI to the South," CEPR Discussion Papers 7533, C.E.P.R. Discussion Papers.
    5. Metaxas, Theodore & Kechagia, Polyxeni, 2016. "Literature review of 100 empirical studies of Foreign Direct Investment: 1950-2015," MPRA Paper 71414, University Library of Munich, Germany.
    6. Hauck, K. & Martin, S. & Smith, P.C., 2016. "Priorities for action on the social determinants of health: Empirical evidence on the strongest associations with life expectancy in 54 low-income countries, 1990–2012," Social Science & Medicine, Elsevier, vol. 167(C), pages 88-98.
    7. Lagoarde-Segot, Thomas & Leoni, Patrick L., 2013. "Pandemics of the poor and banking stability," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4574-4583.
    8. Burns, Darren K. & Jones, Andrew P. & Suhrcke, Marc, 2016. "The relationship between international trade and non-nutritional health outcomes: A systematic review of quantitative studies," Social Science & Medicine, Elsevier, vol. 152(C), pages 9-17.
    9. Herzer, Dierk & Nunnenkamp, Peter, 2012. "FDI and health in developed economies: A panel cointegration analysis," Kiel Working Papers 1756, Kiel Institute for the World Economy (IfW).
    10. Elizabeth Asiedu & Yi Jin & Isaac Kalonda-Kanyama, 2012. "The Impact of HIV/AIDS on Foreign Direct Investment: Evidence from Sub-Saharan Africa," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201207, University of Kansas, Department of Economics.
    11. repec:eee:socmed:v:181:y:2017:i:c:p:74-82 is not listed on IDEAS
    12. Cleeve, Emmanuel A. & Debrah, Yaw & Yiheyis, Zelealem, 2015. "Human Capital and FDI Inflow: An Assessment of the African Case," World Development, Elsevier, vol. 74(C), pages 1-14.
    13. repec:eee:iburev:v:27:y:2018:i:1:p:139-148 is not listed on IDEAS

    More about this item

    Keywords

    Public Governance; Foreign Direct Investment; Health;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gla:glaewp:2009_04. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tedi Racheva). General contact details of provider: http://edirc.repec.org/data/dpglauk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.