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http://ssrn.com/abstract=280062
 
 

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On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?


Elizabeth Asiedu


University of Kansas - Department of Economics

July 2001


Abstract:     
This paper analyzes the determinants of Foreign Direct Investment (FDI) to developing countries and examines why Sub-Saharan Africa (SSA) has been relatively unsuccessful in attracting FDI despite policy reform. The results indicate that the factors that drive FDI have a differential impact on FDI flows to SSA. Specifically, infrastructure development and a higher return on capital promote FDI to non-SSA countries. In contrast these factors have no effect on FDI to SSA. Openness to trade promotes FDI to both SSA and non-SSA countries, however, the marginal benefit from increased openness is less for SSA-suggesting that trade liberalization will generate more FDI to non-SSA countries than SSA countries. Another important finding is that there is an "adverse regional effect" for SSA: a country in SSA will receive less FDI by virtue of its geographical location. These results suggest that Africa is different!

Number of Pages in PDF File: 24

Keywords: Africa, Foreign Direct Investment, Developing Countries

JEL Classification: F23, O55, G32

working papers series





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Date posted: September 11, 2001  

Suggested Citation

Asiedu, Elizabeth, On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different? (July 2001). Available at SSRN: http://ssrn.com/abstract=280062 or http://dx.doi.org/10.2139/ssrn.280062

Contact Information

Elizabeth Asiedu (Contact Author)
University of Kansas - Department of Economics ( email )
1300 Sunnyside Drive
Lawrence, KS 66045-7585
United States
785-864-3501 (Phone)
785-864-5270 (Fax)
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