Exploring the Relationship Between Trade Openness, FDI, and Economic Complexity in Africa

ABSTRACT

This study analyzes the relationship between trade openness, foreign direct investment (FDI), and economic complexity in 32 African economies from 1995 to 2018. Using pooled OLS, fixed effects, random effects, and GMM methods, it finds that trade openness negatively affects economic complexity, while FDI positively impacts it by fostering technology transfer and innovation. However, increased trade openness reduces the positive effect of FDI on economic complexity. These findings highlight the need for nuanced trade and investment strategies in Africa.

KEYWORDS:

• Africa
• economic complexity
• economic growth
• foreign direct investment
• generalized method of moments
• trade openness

Supplementary material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/08853908.2024.2374739

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ Algeria, Angola, Botswana, Burkina Faso, Cameroon, Congo dem, Congo rep, Côte d’Ivoire, Egypt, Gabon, Ghana, Guinea, Kenya, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Mozambique, Namibia, Nigeria, Senegal, South Africa, Tanzania, Togo, Tunisia, Uganda, Zambia, and Zimbabwe.