IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/9946.html
   My bibliography  Save this paper

Infrastructure Quality and FDI Inflows : Evidence from the Arrival of High-Speed Internet in Africa

Author

Listed:
  • Mensah,Justice Tei
  • Traore,Nouhoum-000531164

Abstract

Does ambient infrastructural quality affect foreign direct investment (FDI) in developingcountries This paper investigates how the arrival of high-speed internet in Africa triggered FDI into the bankingand technology services sectors. It also explores the role of complementary infrastructure, such as access to reliableelectricity, in amplifying the impact of internet connectivity on investment. The identification strategyexploits plausibly exogenous variations in access to high-speed internet induced by the staggered arrival ofsubmarine fiber-optic internet cables and the subsequent rollout of terrestrial fiber cable networks across locationson the continent. Findings from the paper show that access to high-speed internet induces FDI into the banking andtechnology sectors. However, the impact pertains mainly to countries with access to reliable electricity, thushighlighting the role of complementarities in the impact of infrastructure.

Suggested Citation

  • Mensah,Justice Tei & Traore,Nouhoum-000531164, 2022. "Infrastructure Quality and FDI Inflows : Evidence from the Arrival of High-Speed Internet in Africa," Policy Research Working Paper Series 9946, The World Bank.
    • Handle: RePEc:wbk:wbrwps:9946
    as

    Download full text from publisher

    File URL: http://documents.worldbank.org/curated/en/586221645627068449/pdf/Infrastructure-Quality-and-FDI-Inflows-Evidence-from-the-Arrival-of-High-Speed-Internet-in-Africa.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mensah,Justice Tei, 2018. "Jobs ! electricity shortages and unemployment in Africa," Policy Research Working Paper Series 8415, The World Bank.
    2. Amiti, Mary & Smarzynska Javorcik, Beata, 2008. "Trade costs and location of foreign firms in China," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 129-149, February.
    3. Morten L. Bech & Bart Hobijn, 2007. "Technology Diffusion within Central Banking: The Case of Real-Time Gross Settlement," International Journal of Central Banking, International Journal of Central Banking, vol. 3(3), pages 147-181, September.
    4. Abebe, Girum & McMillan, Margaret & Serafinelli, Michel, 2022. "Foreign direct investment and knowledge diffusion in poor locations," Journal of Development Economics, Elsevier, vol. 158(C).
    5. Torfinn Harding & Beata S. Javorcik, 2011. "Roll Out the Red Carpet and They Will Come: Investment Promotion and FDI Inflows," Economic Journal, Royal Economic Society, vol. 121(557), pages 1445-1476, December.
    6. Rasmané Ouedraogo & Mr. Amadou N Sy, 2020. "Can Digitalization Help Deter Corruption in Africa?," IMF Working Papers 2020/068, International Monetary Fund.
    7. Torfinn Harding & Beata S. Javorcik, 2013. "Investment Promotion and FDI Inflows: Quality Matters," CESifo Economic Studies, CESifo Group, vol. 59(2), pages 337-359, June.
    8. Lawrence Edwards & Rhys Jenkins, 2015. "The Impact of Chinese Import Penetration on the South African Manufacturing Sector," Journal of Development Studies, Taylor & Francis Journals, vol. 51(4), pages 447-463, April.
    9. Beata Smarzynska Javorcik, 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages," American Economic Review, American Economic Association, vol. 94(3), pages 605-627, June.
    10. Jonas Hjort & Jonas Poulsen, 2019. "The Arrival of Fast Internet and Employment in Africa," American Economic Review, American Economic Association, vol. 109(3), pages 1032-1079, March.
    11. Arita, Shawn & Tanaka, Kiyoyasu, 2013. "FDI and investment barriers in developing economies," IDE Discussion Papers 431, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    12. Angelo D'Andrea & Nicola Limodio, 2019. "High-Speed Internet, Financial Technology and Banking in Africa," BAFFI CAREFIN Working Papers 19124, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    13. Crescenzi, Riccardo & Limodio, Nicola, 2021. "The impact of Chinese FDI in Africa: evidence from Ethiopia," LSE Research Online Documents on Economics 108455, London School of Economics and Political Science, LSE Library.
    14. Mayda, Anna-Maria & Parsons, Christopher & Pham, Han & Vézina, Pierre-Louis, 2022. "Refugees and foreign direct investment: Quasi-experimental evidence from US resettlements," Journal of Development Economics, Elsevier, vol. 156(C).
    15. Andersen, Thomas Barnebeck & Dalgaard, Carl-Johan, 2013. "Power outages and economic growth in Africa," Energy Economics, Elsevier, vol. 38(C), pages 19-23.
    16. Veronica Guerrieri & Guido Lorenzoni, 2009. "Liquidity and Trading Dynamics," Econometrica, Econometric Society, vol. 77(6), pages 1751-1790, November.
    17. Reinikka, Ritva & Svensson, Jakob, 1999. "How inadequate provision of public infrastructure and services affects private investment," Policy Research Working Paper Series 2262, The World Bank.
    18. Robert M. Townsend, 1978. "Intermediation with Costly Bilateral Exchange," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 45(3), pages 417-425.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Crescenzi, Riccardo & Limodio, Nicola, 2021. "The impact of Chinese FDI in Africa: evidence from Ethiopia," LSE Research Online Documents on Economics 108455, London School of Economics and Political Science, LSE Library.
    2. Angelo D'Andrea & Nicola Limodio, 2019. "High-Speed Internet, Financial Technology and Banking in Africa," BAFFI CAREFIN Working Papers 19124, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    3. Theodore H. Moran, 2014. "Foreign Investment and Supply Chains in Emerging Markets: Recurring Problems and Demonstrated Solutions," Working Paper Series WP14-12, Peterson Institute for International Economics.
    4. Crescenzi, Riccardo & Di Cataldo, Marco & Giua, Mara, 2021. "FDI inflows in Europe: Does investment promotion work?," Journal of International Economics, Elsevier, vol. 132(C).
    5. Abiodun, Kehinde & Gilbert, Ben, 2022. "Does universal electrification shield firms from productivity loss?," World Development Perspectives, Elsevier, vol. 28(C).
    6. Bin Ni & Yasuyuki Todo & Tomohiko Inui, 2017. "How Effective are Investment Promotion Agencies? Evidence from China," The Japanese Economic Review, Japanese Economic Association, vol. 68(2), pages 232-243, June.
    7. Moran, Theodore H. & Görg, Holger & Seric, Adnan, 2016. "Quality FDI and Supply-Chains in Manufacturing: Overcoming Obstacles and Supporting Development," KCG Policy Papers 1, Kiel Centre for Globalization (KCG).
    8. Mensah, Justice Tei, 2024. "Jobs! Electricity shortages and unemployment in Africa," Journal of Development Economics, Elsevier, vol. 167(C).
    9. Sourafel Girma & Yundan Gong & Holger Görg, 2016. "Foreign Direct Investment, Access to Finance, and Innovation Activity in Chinese Enterprises," World Scientific Book Chapters, in: MULTINATIONAL ENTERPRISES AND HOST COUNTRY DEVELOPMENT Volume 53: World Scientific Studies in International Economics, chapter 5, pages 79-94, World Scientific Publishing Co. Pte. Ltd..
    10. Curzi, Daniele & Raimondi, Valentina & Olper, Alessandro, 2013. "Quality Upgrading, Competition and Trade Policy: Evidence from the Agri-Food Sector," 2013: Productivity and Its Impacts on Global Trade, June 2-4, 2013. Seville, Spain 152386, International Agricultural Trade Research Consortium.
    11. Genthner, Robert & Kis-Katos, Krisztina, 2022. "Foreign investment regulation and firm productivity: Granular evidence from Indonesia," Journal of Comparative Economics, Elsevier, vol. 50(3), pages 668-687.
    12. Thierry Mayer, 2006. "Policy Coherence for Development: A Background Paper on Foreign Direct Investment," OECD Development Centre Working Papers 253, OECD Publishing.
    13. Li, Xing & Chen, Xi & Hou, Keqiang, 2024. "FDI technology spillovers in Chinese supplier-customer networks," International Review of Financial Analysis, Elsevier, vol. 94(C).
    14. Steven Poelhekke & Frederick Van der Ploeg, 2008. "Growth, Foreign Direct Investment and Urban Concentrations: Unbundling Spatial Lags," CESifo Working Paper Series 2474, CESifo.
    15. OKUBO Toshihiro, 2021. "Foreign Direct Investment in China and Domestic Activities of Japanese Firms," Discussion papers 21023, Research Institute of Economy, Trade and Industry (RIETI).
    16. Jonas Hjort & Golvine de Rochambeau & Vinayak Iyer & Fei Ao, 2020. "Informational Barriers to Market Access: Experimental Evidence from Liberian Firms," NBER Working Papers 27662, National Bureau of Economic Research, Inc.
    17. Nicola Cortinovis & Zhiling Wang & Hengky Kurniawan, 2021. "Industrial Relatedness in MNE Spillovers over Geographical Space," Papers in Evolutionary Economic Geography (PEEG) 2111, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Mar 2021.
    18. Natasha Agarwal & Zheng Wang, 2018. "Does the US EXIM Bank really promote US exports?," The World Economy, Wiley Blackwell, vol. 41(5), pages 1378-1414, May.
    19. Mitsuo Inada, 2022. "Promotion or liberalization: The effect of targeted investment policies on foreign direct investment inflows," Pacific Economic Review, Wiley Blackwell, vol. 27(5), pages 489-505, December.
    20. Beata S. Javorcik & Alessia Lo Turco & Daniela Maggioni, 2018. "New and Improved: Does FDI Boost Production Complexity in Host Countries?," Economic Journal, Royal Economic Society, vol. 128(614), pages 2507-2537, September.

    More about this item

    Keywords

    Energy Policies & Economics; Telecommunications Infrastructure; Financial Sector Policy; International Trade and Trade Rules; Investment and Investment Climate;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:9946. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.