Elizabeth Asiedu

On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?

The present invention relates to an underwater harvesting system (1) for harvesting zooplankton or mesoplagic fishes, comprising an underwater vehicle (2) for being lowered into the sea and towed behind a surface vessel (3), comprising a housing (21) provided with an inlet (22) through which zooplankton-containing-fluid may flow; a hose (4) mounted on the underwater vehicle and in fluid communication with the inlet, the hose being adapted to secure and fluidly connect the underwater vehicle to the surface vessel; and pumping means for drawing in a zooplankton-containing-fluid through the inlet in the underwater vehicle and for pumping the zooplankton-containing-fluid through the hose to the surface vessel. The invention further relates to a method for harvesting zooplankton or other marine organisms.

Foreign Direct Investment in Africa: The Role of Natural Resources, Market Size, Government Policy, Institutions and Political Instability

Data from several investor surveys suggest that macroeconomic instability, investment restrictions, corruption and political instability have a negative impact on foreign direct investment (FDI) to Africa. However, the relationship between FDI and these country characteristics has not been studied. This paper uses panel data for 22 countries over the period 1984-2000 to examine the impact of natural resources, market size, government policies, political instability and the quality of the host countrys institutions on FDI. It also analyses the importance of natural resources and market size vis-a-vis government policy and the host countrys institutions in directing FDI flows. The main result is that natural resources and large markets promote FDI. However, lower inflation, good infrastructure, an educated population, openness to FDI, less corruption, political stability and a reliable legal system have a similar effect. A benchmark specification shows that a decline in the corruption from the level of Nigeria to that of South Africa has the same positive effect on FDI as increasing the share of fuels and minerals in total exports by about 35 per cent. These results suggest that countries that are small or lack natural resources can attract FDI by improving their institutions and policy environment. Copyright United Nations University 2006.

The Effect of Corruption on Investment Growth: Evidence from Firms in Latin America, Sub-Saharan Africa, and Transition Countries*

Many of the empirical studies that analyze the impact of corruption on investment have three common features: they employ aggregate (country-level) data on investment, corruption is measured at the country-level, and data for countries from several regions are pooled together. This paper uses firm-level data on investment and measures corruption at the firm and country-level, and allows the effect of corruption to vary by region. Our dependent variable is firms’ investment growth and we employ six measures of corruption from four different sources: two firm-level measures and four country-level measures. We find that the effect of corruption on investments varies significantly across regions: corruption has a negative and significant effect on investment growth for firms in Transition countries but has no significant impact for firms in Latin America and Sub-Saharan Africa. Furthermore, among the variables included in the regressions (firm size, firm ownership, trade orientation, industry, GDP growth, inflation and openness to trade) corruption is the most important determinant of investment growth for Transition countries.

Does Foreign Aid Mitigate the Adverse Effect of Expropriation Risk on Foreign Direct Investment

We construct a model of FDI, risk and aid, where a country loses access to FDI and aid if the country expropriates FDI. We show that: (i) The threat of expropriation leads to under-investment; (ii) The optimal level of FDI decreases as the risk of expropriation rises; and (iii) Under certain conditions, aid mitigates the adverse effect of expropriation risk on FDI. The empirical analysis employs data for 35 low-income countries and 28 countries in Sub-Saharan Africa, over the period 1983-2004. We find that risk has a negative effect on FDI, aid mitigates the adverse effect of risk on FDI, and that bilateral and multilateral aid are roughly equivalent at achieving these results. We also provide an estimate of the level of aid that would eliminate expropriation risk, and find that for low-income countries, the amount of aid would need to at least double in order for aid to completely offset the effect of risk.

On the Impact of Foreign Aid in Education on Growth: How Relevant is the Heterogeneity of Aid Flows and the Heterogeneity of Aid Recipients?

This paper examines whether foreign aid in education has a significant effect on growth. We take into consideration the heterogeneous nature of aid as well as the heterogeneity of aid recipients—we disaggregate the aid data into primary, secondary, and higher education, and run separate regressions for low income and middle income countries. We find that the effect of aid varies by income as well as by the type of aid. Thus our results underscore the importance of the heterogeneity of aid flows as well as the heterogeneity of recipient countries when analyzing the effect of aid on growth.

Debt relief and institutional reform: a focus on Heavily Indebted Poor Countries

Abstract This paper presents a model that links debt relief to the quality of institutions in a country. An important result is that a country needs to achieve some minimum threshold of institutional quality in order to benefit from debt relief. For the empirical analysis, I employ 12 measures of institutional quality to study the institutional environment in Heavily Indebted Poor Countries (HIPCs). The results indicate that HIPCs have weak institutions—much weaker than other developing countries. This suggests that in order for the HIPC debt-relief program to be successful, institutional reform should form an integral part of the program.

Remittances and investment in education: Evidence from Ghana

This paper uses both cross-section and pseudo-panel data to investigate the effects of remittances on investment in education in Ghana. We find that remittances significantly increase the probability that families enroll their children in primary and secondary schools, suggesting that remittances increase education human capital formation. The impact of remittances on the probability of primary and secondary school enrollment is particularly strong for international remittance. In addition, there is evidence that remittances to female-headed households increase education investment more than do remittances to male-headed households. We interpret our results to mean that international remittances improve prospects for economic growth and decrease poverty in the long run through the human capital channel. Our results are robust to sample and estimation method.

The Socio‐Economic Determinants of HIV/AIDS Infection Rates in Lesotho, Malawi, Swaziland and Zimbabwe

Using data from the Demographic and Health Survey, this article analyses the relationship between HIV status and the socio-economic and demographic characteristics of adults in Lesotho, Malawi, Swaziland and Zimbabwe. It constructs the risk profile of the average adult, computes the values of age, education and wealth where the estimated probability of infection assumes its highest value, and determines the percentage of adults for whom these three factors are positively correlated with that probability. It finds that in all four countries: (i) the probability of being HIV-positive is higher for women than for men; (ii) the likelihood of infection is higher for urban than for rural residents; and (iii) there is an inverted-U relationship between age and HIV status. Also that, unlike gender, rural/urban residence and age, the relationship between the probability of infection and wealth, education and marital status varies by country. The results provide support for country-specific and more targeted HIV policies and programmes.

The Determinants of Foreign Direct Investment Employment Restrictions

This paper examines the determinants of FDI employment restrictions. We construct a political economy model where the TNE and the government have different objective functions: the TNE maximizes profits, and the host government cares about tax revenue and local employment. We show that the level of employment preferred by the government exceeds the level preferred by the TNE - the divergence in preferences motivates the government to impose restrictions. We test the implications of the model using data on employment restrictions derived from the World Banks World Business Environment Survey conducted in 1999/2000. The analysis employs data for up to 1147 foreign-owned firms operating in 44 countries.