Foreign Direct Investment and Industrialization of Africa: A New Approach

By Bruno Emmanuel Ongo Nkoa

English

This article uses data from fifty-three African countries to discuss the contribution of foreign direct investment (FDI) to the industrialization of the continent. The study period is 1975-2014. The estimation technique is based on the generalized method of moments in system. The results show that : (i) FDI contributes significantly to the added value of industry to GDP but does not contribute to industrial employment ; (ii) the positive and significant effect was observed in four sub regions except East Africa ; (iii) using a composite index of industrialization, the contribution of FDI is very high. From these results, two main recommendations of economic policies are proposed. The first is to strengthen private investment in order to increase its participation in the structural transformation of the continent. The second is to build specific indicators of the industrialization of Africa.JEL Codes: E23, F21, F41, L71, L73, L74

Keywords

  • foreign direct investment
  • industrialization
  • Africa
  • generalized method of moments
  • composite index
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