Working Paper: CEPR ID: DP17838
Authors: Bernard Hoekman; Marco Sanfilippo; Margherita Tambussi
Abstract: This paper analyzes the relationship between inward FDI and structural transformation of local labour markets in Africa. We combine geolocalized information on the distribution of FDI with a novel database that provides information from 40,665,627 individuals in 2,570 subnational units over the period 1987-2019. Results are suggestive of a positive effect of FDI on structural transformation. FDI contributes to an increase in employment, and shifts of workers towards modern industries and higher-skilled occupations. No effects are found on self-employment. Results are heterogeneous, reflecting the characteristics of the foreign investor and of the business activity undertaken by foreign firms in the local market. Geospatial analysis of changes in performance of domestic firms exposed to nearby FDI projects provides evidence of horizontal spillovers and inter-industry linkages, suggesting a complementary mechanism through which FDI drives structural change.
Keywords: Africa; Jobs; Structural Transformation
JEL Codes: F23; L16; N17
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Foreign Direct Investment (FDI) (F21) | Employment levels (J23) |
| Foreign Direct Investment (FDI) (F21) | Workforce composition towards modern sectors (J21) |
| Foreign Direct Investment (FDI) (F21) | Share of employed population (J21) |
| Foreign Direct Investment (FDI) (F21) | High-skilled workers (J24) |
| Foreign Direct Investment (FDI) (F21) | Structural changes away from agriculture (L16) |
| Foreign Direct Investment (FDI) (F21) | Non-agricultural employment (J43) |
| Foreign Direct Investment (FDI) (F21) | Effects on self-employment (J23) |
| Foreign Direct Investment (FDI) (F21) | Effects on lower-skilled jobs (F66) |
| Foreign Direct Investment (FDI) (F21) | Persistence of positive effects over time (C41) |