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The Linkages between FDI and Domestic Investment: Unravelling the Developmental Impact of Foreign Investment

Leonce Ndikumana and Sher Verick ()

UMASS Amherst Economics Working Papers from University of Massachusetts Amherst, Department of Economics

Abstract: Despite the recent increase in foreign direct investment (FDI) to African countries, these resources have not had a meaningful impact on economic development because of limited effects on domestic factor markets, especially domestic investment and employment. In this context, this study analyses the two-way linkages between FDI and domestic investment in Sub-Saharan Africa. The results suggest that firstly, FDI crowds in domestic investment, and secondly, countries will gain much from measures aimed at improving the domestic investment climate. Moreover, there are alternatives to resource endowments as a means of attracting foreign investment to non-resource rich countries. JEL Categories: E22; F21; F23

Keywords: FDI; private investment; public investment; Africa (search for similar items in EconPapers)
Date: 2007-12
New Economics Papers: this item is included in nep-afr
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