Does FDI Affect Productivity and Growth in Sub-Saharan Africa?

Abstract

This study investigates the direct and indirect effects of foreign direct investment (FDI) on economic growth and total factor pro ductivity (TFP) using data for 25 countries in sub-Saharan Africa during the period 1980–2014. The main findings reveal that the direct effect of FDI on both economic growth and TFP is largely negative. Furthermore, the results suggest that the influence of financial development and human capital accumulation on the effect of FDI is negligible. The paper proposes policy considerations to facilitate the potential role of financial access and human capital in exerting a positive impact of FDI on growth.