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The Impact of HIV/AIDS on Foreign Direct Investment: Evidence from Sub-Saharan Africa

  • Elizabeth Asiedu

    (Department of Economics, The University of Kansas)

  • Yi Jin

    (Department of Economics, Monash University)

  • Isaac Kalonda-Kanyama

    (Department of Economics, The University of Kansas)

We employ panel data from 40 countries in sub-Saharan Africa over the period 1990-2008 to examine whether HIV/AIDS has a causal effect on FDI. We find that HIV/AIDS has a negative but diminishing effect on FDI, and this adverse effect occurs even when the HIV prevalent rate is as low as 0.1 percent. The empirical result is then rationalized by a simple theoretical model.

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Paper provided by University of Kansas, Department of Economics in its series WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS with number 201207.

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Length: 32 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:kan:wpaper:201207
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  1. 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.
  2. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
  3. Hansen, Henrik & Rand, John, 2005. "On the Causal Links between FDI and Growth in Developing Countries," Working Paper Series RP2005/31, World Institute for Development Economic Research (UNU-WIDER).
  4. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
  5. Sebnem Kalemli-Ozcan & Belgi Turan & Chinhui Juhn, 2009. "HIV and Fertility in Africa: First Evidence from Population Based Surveys," 2009 Meeting Papers 650, Society for Economic Dynamics.
  6. Harsha Thirumurthy & Markus Goldstein & Joshua Graff Zivin, 2005. "The Economic Impact of AIDS Treatment: Labor Supply in Western Kenya," Working Papers id:300, eSocialSciences.
  7. Scott McDonald & Jennifer Roberts, 2004. "Aids and Economic Growth: A Human Capital Approach," Working Papers 2004008, The University of Sheffield, Department of Economics, revised Aug 2004.
  8. Desbordes, Rodolphe & Azémar, Céline, 2008. "Public Governance, Health and Foreign Direct Investment in Sub-Saharan Africa," SIRE Discussion Papers 2008-23, Scottish Institute for Research in Economics (SIRE).
  9. Emily Oster, 2007. "Routes of Infection: Exports and HIV Incidence in Sub-Saharan Africa," NBER Working Papers 13610, National Bureau of Economic Research, Inc.
  10. 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.
  11. Asiedu, Elizabeth & Jin, Yi & Nandwa, Boaz, 2009. "Does foreign aid mitigate the adverse effect of expropriation risk on foreign direct investment?," Journal of International Economics, Elsevier, vol. 78(2), pages 268-275, July.
  12. Sebnem Kalemli-Ozcan & Belgi Turan, 2010. "HIV and Fertility Revisited," NBER Working Papers 16115, National Bureau of Economic Research, Inc.
  13. Hayakawa, Kazuhiko, 2007. "Small sample bias properties of the system GMM estimator in dynamic panel data models," Economics Letters, Elsevier, vol. 95(1), pages 32-38, April.
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