Foreign Aid, Political Power and FDI: Do Aid-dependent Institutions Facilitate Investment in Africa?

IF 0.8 Q2 AREA STUDIES Insight on Africa Pub Date : 2023-12-07 DOI:10.1177/09750878231209921
Dongni Wang, Carmen Fillat-Castejon
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Abstract

In this article, we examine the nexus between foreign development assistance and the attraction of foreign direct investment (FDI) through a de facto political power, as an aid-seeking and likely aid-dependent group. We apply structural equation modelling to investigate the direct and indirect effect of aid on FDI via economic institutions for a sample of 42 African countries from 2002 to 2016. Our results corroborate a direct positive effect of aid and institutions on FDI as a productive financial source. However, an aid-dependent de facto political power does not improve the economic institutions, and within a broad institutional context, it may even worsen them, evidencing the indirect effect of reducing a country’s attractiveness for FDI. This study offers robust evidence under different specifications and variables of institutions in addition to several controls for political and strategic interests and economic conditions. We ultimately develop a model explaining why aid barely makes any contribution to institutional reforms. In countries that are heavily dependent on aid, the beneficiary group is discouraged from improving institutional qualities as the source of benefits would be discontinued.
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外国援助、政治权力和外国直接投资:依赖援助的机构是否促进了对非洲的投资?
在本文中,我们考察了外国发展援助与通过事实上的政治力量吸引外国直接投资(FDI)之间的关系,作为寻求援助和可能依赖援助的群体。我们运用结构方程模型,以2002年至2016年42个非洲国家为样本,研究了援助对通过经济机构进行的外国直接投资的直接和间接影响。我们的研究结果证实了援助和制度对外国直接投资作为一种生产性资金来源的直接积极影响。然而,依赖援助的事实上的政治权力并不能改善经济制度,在广泛的制度背景下,它甚至可能使经济制度恶化,这证明了降低一个国家对外国直接投资的吸引力的间接影响。除了对政治战略利益和经济条件的若干控制外,本研究还在不同的制度规范和变量下提供了强有力的证据。我们最终建立了一个模型来解释为什么援助对制度改革几乎没有任何贡献。在严重依赖援助的国家,受益群体不愿改进体制素质,因为福利的来源将会停止。
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来源期刊
Insight on Africa
Insight on Africa AREA STUDIES-
CiteScore
1.80
自引率
0.00%
发文量
9
期刊介绍: nsight on Africa is a biannual peer-reviewed academic journal covering contemporary African affairs and issues of policy relevance. It focuses on, though not confined to, foreign policies and developmental issues of African countries. The journal specially encourages article submission on issues related to emerging powers in Africa, BRICS in Africa and Afro-Asian relations. The journal is owned by African Studies Association of India (ASA India) located at Centre for African Studies, Jawaharlal Nehru University, New Delhi and its publication is managed by Policy Research Institute of African Studies Association (PRIASA) based in New Delhi.
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