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Openness, Investment and Growth in Sub-Saharan Africa

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  • Hector Sala
  • Pedro Trivín

Abstract

This paper revisits the determinants of economic growth in Sub-Saharan Africa by looking at conditional and unconditional convergence, and by focusing on the growth incidence of globalisation, domestic investment (DI), and foreign direct investment (FDI). We use annual time-series to estimate dynamic panel data models that exploit all sample information (i.e., we do not only use 5-year averages as is standard in the literature). We find the rate of conditional convergence to be around 4%, and the growth impact of FDI and DI to be greater the greater is the change in the degree of economic openness. We also find a net crowding out effect between both types of capital so that larger amounts of FDI reduce the impact of DI on economic growth (and vice versa). These results are obtained through the estimation of multiplicative interaction models which allows us to evaluate the interactions between changes in openness, DI and the net flows of FDI. This constitutes a novelty in the appraisal of the globalisation and investment impact on economic growth.

Suggested Citation

  • Hector Sala & Pedro Trivín, 2014. "Openness, Investment and Growth in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies, vol. 23(2), pages 257-289.
    • Handle: RePEc:oup:jafrec:v:23:y:2014:i:2:p:257-289.
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    File URL: http://hdl.handle.net/10.1093/jae/ejt027
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    Cited by:

    1. Ogundari, Kolawole & Awokuse, Titus, 2018. "Human capital contribution to economic growth in Sub-Saharan Africa: Does health status matter more than education?," Economic Analysis and Policy, Elsevier, vol. 58(C), pages 131-140.
    2. Yiyang Chen & Fuxin Zhang, 2018. "Fiscal Expenditure and Education Quality in China: A Regional Heterogeneity Analysis," European Journal of Marketing and Economics Articles, Revistia Research and Publishing, vol. 1, ejme_v1_i.
    3. Mullings, Robert & Mahabir, Aruneema, 2018. "Growth by Destination: The Role of Trade in Africa’s Recent Growth Episode," World Development, Elsevier, vol. 102(C), pages 243-261.
    4. Daniel Sakyi & José Villaverde & Adolfo Maza & Isaac Bonuedi, 2017. "The Effects of Trade and Trade Facilitation on Economic Growth in Africa," African Development Review, African Development Bank, vol. 29(2), pages 350-361, June.
    5. Samuel Tawiah Baidoo & Daniel Sakyi & Enock Kojo Ayesu & Grace Nkansa Asante & John Bosco Dramani, 2023. "Estimating the effect of economic globalization on welfare in Africa," SN Business & Economics, Springer, vol. 3(9), pages 1-25, September.
    6. Atif Awad, 2021. "Which Contributes More to Economic Growth in the MENA Region: Health or Education? An Empirical Investigation," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(3), pages 1119-1133, September.
    7. Enock Kojo Ayesu & Daniel Sakyi & Alexander Bilson Darku, 2023. "Seaport efficiency, port throughput, and economic growth in Africa," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 25(3), pages 479-498, September.
    8. J. Acalin & B. Cabrillac & G. Dufr not & L. Jacolin & S. Diop, 2015. "Financial integration and growth correlation in Sub-Saharan Africa," Working papers 561, Banque de France.
    9. Fengjiao Zhou & Mohamad Shaharudin bin Samsurijan & Ridwan Lanre Ibrahim & Kazeem Bello Ajide, 2024. "The conditioning role of institutions in the nonrenewable and renewable energy, trade openness, and sustainable environment nexuses: a roadmap towards sustainable development," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(8), pages 19597-19626, August.
    10. Peter N. Kiriri, 2019. "Consumer Perception: Animosity, Ethnocentrism and Willingness to Buy Chinese Products," European Journal of Marketing and Economics Articles, Revistia Research and Publishing, vol. 2, ejme_v2_i.
    11. Bunje, Madinatou Yeh & Abendin, Simon & Wang, Yin, 2022. "The multidimensional effect of financial development on trade in Africa: The role of the digital economy," Telecommunications Policy, Elsevier, vol. 46(10).

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