Foreign Direct Investment and Structural Transformation in Africa

Bernard Hoekman, Marco Sanfilippo and Margherita Tambussi

No 2023/02, RSCAS Working Papers from European University Institute

Abstract: This paper analyzes the relationship between inward FDI and structural transformation of local labour markets in Africa. We combine geolocalized information on the distribution of FDI with a noveldatabase that provides information from 40,665,627 individuals in 2,570 subnational units over the period 1987-2019. Results are suggestive of a positive effect of FDI on structural transformation.FDI contributes to an increase in employment, and shifts of workers towards modern industries and higher-skilled occupations. No effects are found on self-employment. Results are heterogeneous,reflecting the characteristics of the foreign investor and of the business activity undertaken by foreign firms in the local market. Geospatial analysis of changes in performance of domestic firms exposed to nearby FDI projects provides evidence of horizontal spillovers and inter-industry linkages, suggesting a complementary mechanism through which FDI drives structural change.

Keywords: FDI; Jobs; Structural Transformation; Africa (search for similar items in EconPapers)
Date: 2023-01
New Economics Papers: this item is included in nep-afr, nep-dev, nep-fdg, nep-int, nep-inv and nep-ppm
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Working Paper: Foreign Direct Investment and Structural Transformation in Africa (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:rsc:rsceui:2023/02

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