Working Paper: NBER ID: w17544
Authors: Aaron Weisbrod; John Whalley
Abstract: In the 3 years before the 2008 Financial Crisis, GDP growth in sub Saharan Africa (averaged over individual economies) was around 6%, or 2 percentage points above mean growth rates for the preceding 10 years. This period also coincided with significant Chinese FDI flows into these countries, accounting for up to 10% of total inward FDI flows for certain countries in these years. We use growth accounting methods to assess what portion of this elevated growth can be attributed to Chinese inward FDI. We follow Solow (1957), Dennison (1962), and others and use data for individual economies between 1990 and 2008 to calculate Solow residuals for these years for individual economies. We use capital stock data, workforce, and factor share data by country. Capital stock data is unavailable directly, and so we use perpetual inventory methods to construct the data. Factor shares come from UN National Accounts data. We then run counterfactual growth accounting experiments for thirteen Sub-Saharan African countries excluding Chinese FDI inflows for 2005-2007 and also 2003-2009. Our individual results vary by year and country, but there are several year/country combinations where Chinese FDI contributed to an additional one half of a percentage point or above to GDP growth. These results suggest that a significant, even if in some cases small, portion of the elevated growth in sub Saharan Africa in the three years before the Financial Crisis and also in the two years afterwards (2008-2009) can be attributed to Chinese inward investment.
Keywords: Chinese FDI; Sub-Saharan Africa; GDP Growth; Economic Growth
JEL Codes: F21; F43; O4; O47; O55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Uneven distribution of Chinese FDI (F64) | Variability in GDP growth impact (F62) |
| Quality of inputs not fully accounted for (L15) | Bias in results (C83) |
| Chinese FDI (F23) | GDP growth (O49) |
| Chinese FDI (F23) | GDP growth in Zambia (O44) |
| Chinese FDI (F23) | GDP growth in Niger (O55) |
| Chinese FDI (F23) | GDP growth in DRC (O55) |