The FDI-Growth Nexus: A Comparative Analysis of Resource-Rich and Resource-Scarce African Economies

To capture the impact that cross-country resource endowment differences may have on the FDIgrowth relationship, this study investigates the FDIgrowth nexus in Africa by categorizing the countries as resource-rich and resource-scarce, for the period 20002017. Thus, the study is a modest attempt to answer the following main questions: a) Does FDI inflows contribute to economic growth in the host country after controlling for endogeneity? b) Does being natural resource abundant/scarce country alter the FDIgrowth nexus? Using a System GMM, both the direct and interaction effects of FDI on growth are investigated in POLICY BRIEF The FDI-Growth Nexus: A Comparative Analysis of Resource-Rich and Resource-Scarce African Economies Addis Yimer October 2023 / No.788 2 Policy Brief No.788 a comparative framework across resource-rich and resource-scarce African countries. The results show that the effects of FDI on economic growth vary depending on resource richness of countries. While FDI is found to affect growth positively and significantly in resource-scarce African economies, no significant effect of FDI on growth is identified for the resource-rich category.