Impact of the Diaspora and Institutional Environment on FDI Inflows to the ECOWAS Region

Kouakou Constant Ouattara, Cécile Bastidon and Nadege Desiree Yameogo

No 11495, Policy Research Working Paper Series from The World Bank

Abstract: This study examines how diaspora communities affect foreign direct investment flowing into Economic Community of West African States countries. It uses data on international migration to represent the size of the diaspora and estimates their savings. The analysis covers 14 countries from 2005 to 2020, using system generalized method of moments and feasible generalized least squares methods. The study finds that members of the diaspora living in Europe help bring more foreign direct investment to their home countries, while the diaspora in Asia has a smaller and sector-specific effect, helping attract foreign direct investment in extractive industries. The diaspora in North America has little impact, and migration within Africa does not significantly affect foreign direct investment. Importantly, strong home country institutions—like good governance, anti-corruption efforts, and political stability—make the positive effects of the diaspora even greater. The study also finds that former British colonies attract more foreign direct investment than former French or Portuguese colonies, likely because of stronger property rights under common law systems. Although most foreign direct investment continues to target the extractive sector, the study underscores the importance of strengthening institutions and implementing targeted policies in countries of origin. These measures can help harness the potential of diaspora networks to boost investment, particularly in sectors beyond natural resources that can drive structural transformation and quality jobs creation.

Date: 2026-11-02
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