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FDI and Welfare Dynamics in Africa
Author(s) -
Kaulihowa Teresia,
Adjasi Charles
Publication year - 2017
Publication title -
thunderbird international business review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.553
H-Index - 37
eISSN - 1520-6874
pISSN - 1096-4762
DOI - 10.1002/tie.21908
Subject(s) - foreign direct investment , endogeneity , welfare , economics , panel data , international economics , demographic economics , econometrics , macroeconomics , market economy
This article examines the welfare impact of foreign direct investment ( FDI ) in a panel of 20 African countries over the period 2000–2013. We explore the multifactor and nonmonetary measures of welfare and the nonlinear effect of FDI on welfare. We used the Driscoll and Kraay standard errors and augmented mean group ( AMG ) estimator by Eberhardt and Teal (2010) to account for cross‐sectional dependency, endogeneity, and heterogeneity within panel units. The results indicate that although FDI is welfare enhancing, the nonlinear terms report mixed findings. When a multifactor indicator is employed, the increase in the nonlinear term is lower than the linear part. However, there is strong evidence that FDI is ultimately welfare enhancing when a nonmonetary indicator is employed. From an international business perspective, the findings have unlocked the welfare effects of international business on African host economies. International businesses through FDI can enhance welfare in Africa countries. However, the optimal efficacy of FDI ‐welfare impact differs across the various dimensions of welfare. © 2017 Wiley Periodicals, Inc.