Geographical determinants of foreign direct investment: evidence from sub-Saharan Africa

This paper investigates time-invariant geographical determinants of FDI in Sub-Saharan African (SSA). To achieve this objective, a panel data model was estimated using the Hausman-Taylor estimation technique. The estimation results show that the coefficients of time-invariant geographical variables, such as geographical size, and area located within the tropics are positive and statistically significant while the coefficient of distance from the sea is negative and statistically significant. We further disaggregated the sample into sub-regions and found consistent evidence to buttress the claim. The study recommends that SSA countries should take advantage of their geographical factors to come out with common market opportunities to maximise the potential for growth in FDI.

Automated summary

This paper investigates the time-invariant geographical determinants of FDI in Sub-Saharan Africa. The findings suggest that factors such as geographical size and being located within the tropics have a positive and statistically significant impact on FDI, while the distance from the sea has a negative and statistically significant impact. Disaggregation of the sample into sub-regions provides consistent evidence to support these claims. The study recommends that SSA countries leverage their geographical factors to create common market opportunities in order to maximize the potential for FDI growth.