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Foreign Direct Investment in Zimbabwe: The Role of Institutional Factors


  • Farayi Gwenhamo


The purpose of the paper is to examine the impact of property rights on foreign direct investment (FDI) in Zimbabwe for the period 1964-2005. While the macroeconomic determinants of FDI have been analysed to a considerable extent in past empirical work, the role of institutional factors such as the protection of property rights and the efficiency of the legal system has been underexplored. Using a multivariate cointegration framework, the paper employs a newly constructed de jure property rights index for Zimbabwe to determine the impact of property rights on FDI. The empirical evidence shows that property rights are consistently an important explanatory variable of FDI in Zimbabwe, even after controlling for periods when there are no significant new foreign capital inflows. Other significant explanatory variables of FDI in Zimbabwe are the real gross domestic product (GDP), capital intensity, the external debt to GDP ratio, political instability as well as the educational levels.

Suggested Citation

  • Farayi Gwenhamo, 2009. "Foreign Direct Investment in Zimbabwe: The Role of Institutional Factors," Working Papers 144, Economic Research Southern Africa.
  • Handle: RePEc:rza:wpaper:144

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    More about this item


    Foreign Direct Investment (FDI); Property rights; Cointegration and Zimbabwe;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law


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