The effect of population health on the inflows of foreign direct investment in Africa

Abstract

Although a lot of studies exist on the drivers of Foreign Direct Investment (FDI) inflows, very little attention has been paid to the effect of population health, to the extent that, some countries may be willing to compromise their health and safety standards in order to attract FDI inflows. In this study, we provide empirical evidence of the effect of population health on net FDI inflows in Africa. The study employs data from 1997 to 2017 on a sample of 35 African countries. Life expectancy and death rate are used to proxy population health whiles the Instrumental Variable Fixed Effects (IVFE) and the system Generalised Method of Moments (GMM) regressions are used as the baseline and robustness empirical estimation techniques, respectively. The study finds life expectancy and death rate to have positive and negative significant effects on net FDI inflows respectively, irrespective of the estimation technique used. Our findings imply that, instead of lowering health and safety standards, enhancing population health (via for instance, improving access to quality healthcare, improved water and sanitation as well as vaccination against diseases among others) should rather be used as a strategy towards attaining higher net FDI inflows, especially into Africa.