Transport infrastructure and foreign direct investment

A. J. Khadaroo and B. Seetanah
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A. J. Khadaroo: Department of Economics and Statistics, University of Mauritius, Reduit, Mauritius, Postal: Department of Economics and Statistics, University of Mauritius, Reduit, Mauritius
B. Seetanah: School Public Policy and Management, University of Technology, Mauritius, Pointes-Aux-Sables, Mauritius, Postal: School Public Policy and Management, University of Technology, Mauritius, Pointes-Aux-Sables, Mauritius

Journal of International Development, 2010, vol. 22, issue 1, 103-123

Abstract: This paper analyses the role of infrastructure availability, particularly with respect to transportation, in improving the investment climate for and in determining the attractiveness of foreign direct investment (FDI) inflows. The study is initially based on the small island developing state of Mauritius for the period 1960-2004. Using an ARDL approach, transport infrastructure availability is seen to have contributed to the relative attractiveness of the country towards FDI and such is also the case for non-transport infrastructure. Moreover, the presence of dynamism and endogeneity is also established in FDI modelling. The analysis was then extended for the case of a sample of 20 African economies over the period 1986-2000. Using panel data framework, the fixed effect model estimated a positive and significant coefficient for transport infrastructure, implying that foreign direct investors are sensitive to transport capital. The other type of infrastructure is also judged to be important by these investors, though to a slightly lesser extent than transport. These findings supplement the existing literature on the determinant of FDI. Copyright © 2008 John Wiley & Sons, Ltd.

Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jintdv:v:22:y:2010:i:1:p:103-123

DOI: 10.1002/jid.1506

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