Abstract

This paper examines how foreign direct investment affects economic growth in African countries, and how this relationship changes depending on the level of control of corruption. While FDI is often seen as a way to boost growth through investment and technology transfer, past research shows that its benefits are not always guaranteed. In this study, I focus on whether institutional quality, measured through control of corruption, helps explain these mixed results.

Using panel data from 23 African countries over a 25-year period, I analyze the relationship between FDI inflows and GDP per capita growth, including an interaction term to capture how corruption influences this effect. The results suggest that FDI on its own does not always lead to higher growth. Instead, its impact depends on the economic structure of the host country, more specifically, the economy’s resource abundance. In countries with better control of corruption, FDI tends to have a more positive effect on economic growth. However, this relationship changes when resource abundance is included into the equation.

These findings highlight the importance of governance in shaping the outcomes of foreign investment, but also the type of FDI that the host country receives. Rather than assuming that FDI automatically promotes development, this paper shows that institutional quality, as much as type of FDI, plays a key role in determining whether countries can actually benefit from it.

Advisor

Shaukat, Sarah

Department

Economics

Disciplines

Growth and Development | Political Economy

Publication Date

2026

Degree Granted

Bachelor of Arts

Document Type

Senior Independent Study Thesis

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