Towards sustainability: The relationship between foreign direct investment, economic freedom and inclusive green growth

Ofori, Isaac K. and Figari, Francesco and Ojong, Nathanael (2023): Towards sustainability: The relationship between foreign direct investment, economic freedom and inclusive green growth. Forthcoming in: Journal of Cleaner Production No. 406 (5 April 2023)

Abstract

This study contributes to the environmental and socioeconomic sustainability literature by examining three important issues. First, the study examines the effects of foreign direct investment (FDI) and economic freedom on inclusive green growth (IGG) in sub-Saharan Africa (SSA). Second, we investigate whether economic freedom interacts with FDI to promote IGG. Third, we identify minimum thresholds required for economic freedom to cause FDI to foster IGG. The findings are based on macro data for 20 SSA countries. Evidence, based on instrumental variable regression, shows that, unconditionally, FDI is not statistically significant for promoting IGG. Second, the study finds that SSA’s ‘Mostly unfree’ economic architecture conditions FDI to reduce IGG. Third, results from our threshold regression reveal that the minimum threshold required for economic freedom to cause FDI to foster IGG is 66.2% (Moderately free). The study sheds new light on investments necessary for SSA’s economic architecture to form relevant synergies with FDI to promote IGG.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economic Freedom; FDI; Government Integrity; Inclusive Green Growth; Sustainable Development; sub-Saharan Africa
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment ; Long-Term Capital Movements; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance; F - International Economics > F6 - Economic Impacts of Globalization; H - Public Economics > H1 - Structure and Scope of Government; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa; P - Economic Systems > P1 - Capitalist Systems; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q0 - General > Q01 - Sustainable Development; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development ; Environment and Trade ; Sustainability ; Environmental Accounts and Accounting ; Environmental Equity ; Population Growth

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