Does Infrastructural Absorptive Capacity Stimulate FDI-Growth Nexus in ECOWAS?

Figures & data

Figure 1. FDI inflows

Figure 2. Economic performance

Table 1. Data sources and measurements

Variable	Description	Measurement	Source
GDPr	Gross Domestic Product (Growth rates)	Constant 2010 US$	World Development Indicators of World Bank Publication (2018)
GFCF	Gross fixed capital formation	Constant 2010 US$	WDI
LAB	Labour force	Number	WDI
EDU	School enrolment, secondary	Number	WDI
FDI	Foreign Direct Investment (Net inflows)	Index	UNCTAD
M2GDP	Financial depth	Money Supply/GDP	WDI
OPN	Trade openness	(Export + Import)/100	WDI
EXCR	Exchange rate	Official exchange rate, LCU	WDI
INST	Average of the six indicators including: control of corruption, government effectiveness, political stability and absence of violence & terrorism, regulatory quality, rule of law and voice and accountability	Scale	World Governance Inductor of World Bank Publication (2018)
RWL	Foreign Direct Investment (Net inflows)	Index	UNCTAD
ICTgoods	ICT goods export (% of total goods exports)	percentage of total goods exports	WDI
INTURS	Individuals using internet services (% of population)	Percentage	WDI
LMCS	Mobile cellular subscription (per 100 people)	Proportion	WDI
sisvrs	Secure internet services (per million people)	Proportion	WDI

Source: compiled by authors from WDI, 2017

Table 2. Summary statistics of variables

Variable	GDPR	GFCF	LAB	EDU	FDI	M2GDP	OPN	EXCR	INST
Mean	4.9158	3.70E+09	6,235,238	33.9822	4.8836	28.66894	0.8869	749.4173	−0.6255
Median	4.4785	9.32E+08	3,267,098	32.6412	2.1463	23.97028	0.6705	495.277	−0.6619
Maximum	106.2798	7.08E+10	57,461,870	94.2452	85.9631	102.58	11.3776	7485.517	0.5431
Minimum	−30.1452	−3.7E+07	133,921	6.5236	−65.4109	6.1953	0.2044	0.1199	−1.9786
Std. Dev.	8.0149	1.00E+10	10,696,157	17.8525	10.4157	16.6847	0.9734	1237.616	0.5110
Skewness	6.2807	4.8564	3.298658	0.9247	2.8526	1.9647	7.2512	3.3542	0.1953
Kurtosis	85.6808	27.8317	13.1356	3.9329	29.0341	7.3503	70.8874	14.7543	2.6380
Jarque-Bera	91,795.05	9331.203	1919.598	56.3127	9322.981	451.0366	63,249.71	2404.051	3.0139
Probability	0	0	0	0	0	0	0	0	0.2216
Sum	1548.472	1.17E+12	1.96E+09	10,704.39	1538.336	9030.715	279.386	236,066.5	−159.491
Sum Sq. Dev.	20,171.32	3.16E+22	3.59E+16	100,075.3	34,065.14	87,411.3	297.5092	4.81E+08	66.3363
Observations	315	315	315	315	315	315	315	315	255

Source: Computed by Authors

Table 3. Correlation test

Variable	GDPR	GFCF	LAB	EDU	FDI	M2GDP	OPN	EXCR	INST
GDPR	1	0.0890	0.1195	0.0319	−0.1074	0.0199	0.1479	−0.0852	0.0735
GFCF		1	0.9293	0.0738	−0.0854	−0.0962	−0.1611	−0.1514	−0.1641
LAB			1	−0.0141	−0.1107	−0.1752	−0.2118	−0.1241	−0.2302
EDU				1	0.1785	0.7596	0.2408	−0.1230	0.3469
FDI					1	−0.0369	−0.0234	0.0324	−0.0112
M2GDP						1	0.3713	−0.1824	0.4763
OPN							1	−0.1247	−0.1555
EXCR								1	−0.2868
INST								-	1

Source: Computed by Authors

Table 4. FDI-growth regression model

Variables	(OLS)lgdpr	(FE)Lgdpr	(RE)lgdpr	(DGMM)lgdpr	(SGMM)lgdpr	(XTABOND2)lgdpr
L.lgdpr				−0.370	−0.728	0.698***
				(0.258)	(0.843)	(0.165)
L2.lgdpr					0.142
					(0.512)
lgfcf	0.132	0.159	0.0907	1.179***	4.424	3.848**
	(0.0908)	(0.221)	(0.132)	(0.432)	(5.781)	(1.523)
Llab	−0.114	−2.625***	−0.0463	−7.212***	−1.232	−4.071**
	(0.118)	(0.748)	(0.175)	(2.309)	(3.396)	(1.839)
ledu	0.0922	1.120**	−0.154	12.78*	−3.207	4.866***
	(0.222)	(0.520)	(0.289)	(6.642)	(5.780)	(1.420)
Lfdi	0.0499	0.0133	0.0344	0.0427	−0.0440	−0.292*
	(0.0489)	(0.0549)	(0.0524)	(0.0589)	(0.105)	(0.158)
lm2gdp	−0.297*	0.460**	−0.112	−2.825	1.413	−3.462***
	(0.173)	(0.229)	(0.194)	(1.898)	(2.376)	(0.979)
lopn	0.101	0.621**	0.360*	−0.984*	−0.692	−2.910*
	(0.137)	(0.277)	(0.189)	(0.530)	(2.962)	(1.489)
lexcr	−0.0485*	0.0215	−0.0397	−0.513	−0.296	−1.463**
	(0.0290)	(0.147)	(0.0486)	(0.826)	(2.279)	(0.610)
linst_1	−0.219	0.502	−0.0723	−11.97	0.597	−6.124
	(0.529)	(0.804)	(0.685)	(8.834)	(7.063)	(7.965)
Constant	1.426	30.07***	1.767	48.56*	−60.18	−16.79
	(1.385)	(7.128)	(1.817)	(24.95)	(76.95)	(12.99)
Observations	230	230	230	156	184	212
R-squared	0.062	0.125
Number of id		15	15	15	15	15
F-stat (Wald test) F-stat (p-values) Sargan Hansen AR(1) AR(2) No. of instruments	[0.0000]	[0.0000]	2135 [0.0000]	23,152.43 [0.0000] 0.976 0.0023 0.0812 22	14,254.98 [0.0000] 0.852 0.789 0.0001 0.3241 157	12,462.13 [0.0000] 0.964 0.876 0.093 0.208 20

Standard errors in parentheses, *** p < 0.01, ** p < 0.05, * p < 0.1

Source: Computed using Stata 14.0

Table 5. FDI-growth regression (FDI interacted with infrastructural absorptive measures)

Variables	(xtabond2)Lgdpr	(xtabond2)lgdpr	(xtabond2)lgdpr	(xtabond2)lgdpr	(xtabond2)lgdpr	(xtabond2)lgdpr	(xtabond2)lgdpr
L.lgdpr	0.698***	−1.581	−1.000**	0.515*	0.460*	−0.462	−0.0400
	(0.165)	(1.115)	(0.479)	(0.311)	(0.270)	(0.443)	(0.320)
Lgfcf	3.848**	−2.371	0.722	1.524	0.863**	0.155	−0.878
	(1.523)	(2.334)	(0.955)	(1.230)	(0.413)	(0.771)	(1.330)
Llab	−4.071**	2.932	−1.767	−1.642	−0.462	1.018	2.643
	(1.839)	(2.350)	(1.592)	(1.897)	(0.524)	(1.137)	(2.267)
Ledu	4.866***	18.26*	9.468	7.721***	−0.243	7.422***	1.420
	(1.420)	(10.42)	(6.581)	(1.752)	(2.150)	(2.250)	(1.536)
Lfdi	−0.292*
	(0.158)
lm2gdp	−3.462***	−10.06**	−3.874	−4.544***	−1.147	−6.862***	−1.947**
	(0.979)	(3.977)	(3.015)	(0.916)	(1.121)	(1.425)	(0.890)
Lopn	−2.910*	−0.045*	−2.957	−1.414	0.501	0.979	2.013
	(1.489)	(1.249)	(2.034)	(1.293)	(0.975)	(0.793)	(1.656)
Lexcr	−1.463**	−3.206**	−0.220	−1.314***	−0.184	−1.380***	−0.913**
	(0.610)	(1.275)	(0.546)	(0.350)	(0.207)	(0.464)	(0.378)
linst_1	−6.124	−3.783	14.18*	6.559	1.357	14.53***	9.309
	(7.965)	(5.891)	(7.571)	(7.002)	(3.825)	(5.312)	(6.236)
lfdi_rwl		−0.00213**
		(0.000888)
lfdi_ictgxp			−5.546**
			(2.276)
lfdi_inturs				−0.0897***
				(0.0196)
lfdi_lmcs					0.00484
					(0.00949)
lfdi_sisvrs						−0.0102**
						(0.00416)
Constant	−16.79	−26.16	−32.69*	−28.53***	−5.652	−36.33***	−24.32*
	(12.99)	(18.13)	(16.86)	(11.01)	(9.384)	(10.13)	(12.66)
Observations	212	122	181	212	207	209	212
Number of id	15	8	13	15	15	15	15
F-stat (Wald test) F-stat (p-values) Sargan Hansen AR(1) AR(2) No. of instruments	3218 [0.0000] 0.871 0.592 0.090 0.023 20	8921.56 [0.0000] 0.879 0.596 0.094 0.214 20	9218.62 [0.0000] 0.883 0.310 0.035 0.344 20	7219.12 [0.0000] 0.842 0.724 0.093 0.427 20	8729 [0.0000] 0.921 0.260 0.031 0.342 20	29,173 [0.0000] 0.943 0.521 0.024 0.1131 20	5236.8 [0.0000] 0.896 0.321 0.008 0.8945 20

Standard errors in parentheses, *** p < 0.01, ** p < 0.05, * p < 0.1

Source: Computed using Stata 14.0

World Governance Indicators (WGI) Statistics 2018 accessed on 06- 11-2018@ https://databank.worldbank.org/source/worldwide-governance-indicators

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