{"title":"Foreign Aid, Political Power and FDI: Do Aid-dependent Institutions Facilitate Investment in Africa?","authors":"Dongni Wang, Carmen Fillat-Castejon","doi":"10.1177/09750878231209921","DOIUrl":null,"url":null,"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.","PeriodicalId":42199,"journal":{"name":"Insight on Africa","volume":null,"pages":null},"PeriodicalIF":0.8000,"publicationDate":"2023-12-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Insight on Africa","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1177/09750878231209921","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"AREA STUDIES","Score":null,"Total":0}
引用次数: 0
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.
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.