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

Posted: 16 Jan 2002

See all articles by Elizabeth Asiedu

Elizabeth Asiedu

University of Kansas - Department of Economics

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Abstract

This paper explores whether factors that affect Foreign Direct Investment (FDI) in developing countries affect countries in Sub-Saharan Africa (SSA) differently. The results indicate that: (i) A higher return on investment and better infrastructure have a positive impact on FDI to non-SSA countries, but have no significant impact on FDI to SSA; (ii) Openness to trade promotes FDI to SSA and non-SSA countries, however, the marginal benefit from increased openness is less for SSA. These results imply that Africa is different - suggesting that policies that have been successful in other regions may not be equally successful in Africa.

Keywords: Africa, capital flows, foreign direct investment, investment risk, developing countries

JEL Classification: F1, F2

Suggested Citation

Asiedu, Elizabeth, On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?. World Development, Vol. 30, No. 1, 2002. Available at SSRN: https://ssrn.com/abstract=294662

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University of Kansas - Department of Economics ( email )

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