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Foreign Direct Investment, Governance and Inclusive Growth in Sub-Saharan Africa

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  • Ofori, Isaac K.
  • Asongu, Simplice A.

Abstract

Motivated by the projected rebound of foreign direct investment (FDI) inflow to sub-Saharan Africa (SSA) following the implementation of the AfCFTA and the finalization of the Africa Investment Protocol, we examine how FDI modulates the effects of various governance dynamics on inclusive growth in SSA. We do this by testing two hypotheses– first, whether unconditionally FDI and various governance indicators (rule of law, control of corruption, regulatory quality, governance effectiveness, political stability, and voice and accountability) foster inclusive growth in SSA; and second, whether these governance dynamics engender positive synergy with FDI on inclusive growth in SSA. Using data from the World Bank’s World Governance Indicators and the World Development Indicators for the period 1990–2020, we employ several fixed effects, random effects, and the system GMM estimators for the analysis. First, we find that FDI and all our governance dynamics are significant inclusive growth enhancers in SSA. Second, though FDI amplifies the effects of all our governance dynamics on inclusive growth in SSA, governance effectiveness, voice and accountability, and political stability are keys. Policy recommendations are provided.

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  • Ofori, Isaac K. & Asongu, Simplice A., 2021. "Foreign Direct Investment, Governance and Inclusive Growth in Sub-Saharan Africa," EconStor Preprints 234518, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:234518
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    Cited by:

    1. Ofori, Isaac K. & Armah, Mark K. & Asmah, Emmanuel E., 2021. "Towards the Reversal of Poverty and Income Inequality Setbacks Due to COVID-19: The Role of Globalisation and Resource Allocation," MPRA Paper 108619, University Library of Munich, Germany.
    2. Pamela E. Ofori & Simplice A. Asongu & Vanessa S. Tchamyou, 2021. "The Synergy between Governance and Economic Integration in Promoting Female Economic Inclusion in Sub-Saharan Africa," Working Papers 21/071, European Xtramile Centre of African Studies (EXCAS).
    3. Ofori, Isaac K. & Asonngu, Simplice A., 2021. "Foreign Direct Investment, Governance and Inclusive Growth in Sub-Saharan Africa," MPRA Paper 108178, University Library of Munich, Germany.
    4. Pamela E. Ofori & Simplice A. Asongu & Vanessa S. Tchamyou & Raufhon Salahodjaev, 2023. "The Synergy between Governance and Trade Openness in Promoting Female Economic Inclusion in Sub-Saharan Africa," Working Papers 23/001, European Xtramile Centre of African Studies (EXCAS).
    5. Alberto Costantiello & Angelo Leogrande, 2023. "The Impact of Voice and Accountability in the ESG Framework in a Global Perspective," Working Papers hal-04043775, HAL.
    6. Mark K. Armah, 2024. "The effect of central bank credibility on economic growth and output volatility in inflation targeting regime," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 26(2), pages 619-640, August.
    7. Dossou, Toyo Amègnonna Marcel & Ndomandji Kambaye, Emmanuelle & Asongu, Simplice A. & Alinsato, Alastaire Sèna & Berhe, Mesfin Welderufael & Dossou, Kouessi Pascal, 2023. "Foreign direct investment and renewable energy development in sub-saharan Africa: Does governance quality matter?," Renewable Energy, Elsevier, vol. 219(P1).
    8. Elvis Dze Achuo & Tii N. Nchofoung & Simplice A. Asongu & Gildas Dohba Dinga, 2021. "Unravelling the Mysteries of Underdevelopment in Africa," Working Papers of the African Governance and Development Institute. 21/073, African Governance and Development Institute..
    9. Chunhua Xin & Shuangshuang Fan & Zihao Guo, 2024. "Can digital finance promote inclusive growth to meet sustainable development in China? A machine learning approach," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(10), pages 26647-26677, October.
    10. Ofori, Isaac K. & Armah, Mark K. & Taale, Francis & Ofori, Pamela E., 2021. "Addressing the Severity and Intensity of Poverty in Sub-Saharan Africa: How Relevant is the ICT and Financial Development Pathway?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue forthcomi.
    11. Pamela E. Ofori & Isaac K. Ofori & Simplice A. Asongu, 2022. "Towards efforts to enhance tax revenue mobilisation in Africa: Exploring the interaction between industrialisation and digital infrastructure," Working Papers of the African Governance and Development Institute. 22/045, African Governance and Development Institute..
    12. Isaac K. Ofori & Pamela E. Ofori & Simplice A. Asongu, 2021. "Towards Efforts to Enhance Tax Revenue Mobilisation in Africa: Exploring Synergies between Industrialisation and ICTs," Research Africa Network Working Papers 21/058, Research Africa Network (RAN).
    13. Isaac K. Ofori & Francesco Figari, 2022. "Economic Globalisation and Inclusive Green Growth in Africa: Contingencies and Policy-Relevant Thresholds of Governance," Working Papers 22/053, European Xtramile Centre of African Studies (EXCAS).
    14. Bosede Ngozi Adeleye & Ismail Bengana & Abdelaziz Boukhelkhal & Mohammad Musa Shafiq & Hauwah K. K. Abdulkareem, 2022. "Does Human Capital Tilt the Population-Economic Growth Dynamics? Evidence from Middle East and North African Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 162(2), pages 863-883, July.
    15. Isaac K. Ofori & Francesco Figari, 2022. "Economic Globalisation and Inclusive Green Growth in Africa: Contingencies and Policy-Relevant Thresholds of Governance," Working Papers of the African Governance and Development Institute. 22/053, African Governance and Development Institute..

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    More about this item

    Keywords

    AfCFTA; Economic Integration; FDI; Governance; Inclusive Growth; Africa;
    All these keywords.

    JEL classification:

    • F6 - International Economics - - Economic Impacts of Globalization
    • F15 - International Economics - - Trade - - - Economic Integration
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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