Effects of democracy and natural resources on foreign direct investment in African natural resource-rich countries

Abstract

This article aims to investigate the effects of democracy and natural resources on foreign direct investment (FDI) in African countries rich in natural resources. To this end, an econometric model was estimated using three methods, namely, fixed effects with sample heteroscedasticity correction, the instrumental variables method and the general method of moments, on a panel of 22 countries over the period 2000-2017. On the one hand, the results show that democracy has a positive effect on FDI. On the other hand, the analysis showed that natural resources do not help to attract FDI. Our findings suggest that concrete actions are needed in terms of strengthening and improving governance and democratic institutions to better attract FDI in African countries rich in natural resources.