The Determinants of Foreign Direct Investment in a Comparative Perspective: Is there a Bias against Sub-Saharan Africa?

Abstract

This paper explores the determinants of foreign direct investment in a comparative perspective and looks for evidence of a bias on the part of foreign investors against sub-Saharan Africa. The paper examines whether Africa's tiny share of world FDI flows is a consequence of inappropriate policies or a general investor bias against the region (perhaps due to the lingering effects of bad reputation). The empirical results suggest that Africa's marginalization in the global competition for FDI is of its own making – the result of a generally inferior investment environment. The findings also reveal important differences in the determinants of FDI between SSA countries and the rest of the world.

Keywords: Foreign Direct Investment, Sub-Saharan Africa