How Deep is Your Love? - Regional Integration and FDI in Sub-Saharan Africa

Abstract

This paper uses a gravity model to assess the impact of deeper integration through Regional Economic Communities (RECs) on foreign direct investment (FDI) in Sub-Saharan Africa (SSA). The analysis includes panel data on 25 host and 35 source countries in SSA over the period 2001-2012. Employing various model specifications, I find that integration efforts of the East African Community (EAC) and Southern African Development Community (SADC) are associated with a significant increase in FDI between the respective REC’s member states. In addition, EAC and SADC members that are open to international trade and those that are less similar to other members especially benefit from deeper integration in terms of FDI.

Keywords: FDI, Economic Integration, Gravity Model, Sub-Saharan Africa

JEL Classification: F15, F21, F23