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Human Capital Development, War and Foreign Direct Investment in Sub-Saharan Africa

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  • Adil Suliman
  • Andre Varella Mollick

Abstract

The authors use a panel data fixed effect model to identify the determinants of foreign direct investment (FDI) for a large sample of 29 sub-Saharan African countries from 1980 to 2003. They test whether human capital development, defined by either literacy rates or economic freedom, and the incidence of war affect FDI flows to these countries. Combining these explanatory variables to several widely used control variables, it was found that the literacy rate (human capital), freedom (political rights and civil rights) and the incidence of war are important FDI determinants. The results confirm our expected signs: FDI inflows respond positively to the literacy rate and to improvements in political rights and civil liberties; war events, by contrast, exert strong negative effects on FDI. For robustness, the model is estimated for religious groupings of sub-Saharan African countries.

Suggested Citation

  • Adil Suliman & Andre Varella Mollick, 2009. "Human Capital Development, War and Foreign Direct Investment in Sub-Saharan Africa," Oxford Development Studies, Taylor & Francis Journals, vol. 37(1), pages 47-61.
    • Handle: RePEc:taf:oxdevs:v:37:y:2009:i:1:p:47-61
    DOI: 10.1080/13600810802660828
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    References listed on IDEAS

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    1. Todd J. Moss & Vijaya Ramachandran & Manju Kedia Shah, 2004. "Is Africa’s Skepticism of Foreign Capital Justified? Evidence from East African Firm Survey Data," Working Papers 41, Center for Global Development.
    2. Pfeffermann, G.P. & Madarassy, A., 1992. "Trends in Private Investment in Developing Countries," Papers 16, World Bank - International Finance Corporation.
    3. Koji Miyamoto, 2003. "Human Capital Formation and Foreign Direct Investment in Developing Countries," OECD Development Centre Working Papers 211, OECD Publishing.
    4. Collier, Paul & Dehn, Jan, 2001. "Aid, shocks, and growth," Policy Research Working Paper Series 2688, The World Bank.
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