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Investment Climate and Foreign Direct Investment in Africa: The Role of Ease of Doing Business

Author

Listed:
  • Angelica E. Njuguna

    (Kenyatta University)

  • Emmanuel Nnadozie

    (The African Capacity Building Foundation)

Abstract

This paper explores the relationship between the ease of doing business, as one of the investment climate indicators, and foreign direct investment (FDI) inflows in Africa. It uses instrumental variable estimation and the control function approach to correct for possible endogeneity between FDI and the ease of doing business as well as economic growth. The study uncovers evidence that the ease of doing business plays a positive role in attracting FDI. The findings support African countries’ attempts to invest in improving their business environment to attract favorable FDI.

Suggested Citation

  • Angelica E. Njuguna & Emmanuel Nnadozie, 2022. "Investment Climate and Foreign Direct Investment in Africa: The Role of Ease of Doing Business," Journal of African Trade, Springer, vol. 9(1), pages 23-46, December.
    • Handle: RePEc:spr:jouafr:v:9:y:2022:i:1:d:10.1007_s44232-022-00003-x
    DOI: 10.1007/s44232-022-00003-x
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    References listed on IDEAS

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    2. Victor Ushahemba Ijirshar & Joshua Kpelai Nomkuha & Benjamin Bem Bura & Joseph Tarza Sokpo & Mlumun Queen Ijirshar, 2023. "Ease of doing business and investment among West African countries," African Development Review, African Development Bank, vol. 35(2), pages 97-112, June.
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    More about this item

    Keywords

    Foreign direct investment; Ease of doing business; Investment climate; Instrumental variable estimation; Control function approach; Africa;
    All these keywords.

    JEL classification:

    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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