"Foreign Investors and Their Home Destination Comparing the Effects of Western and Chinese Foreign Direct Investment on Corruption and Rule of Law in Africa "

Abstract

The purpose of this thesis is to investigate the interplay between FDI stock to African countries and the control of corruption and rule of law in these countries. More specifically, this thesis compares the effects of FDI originating from the United States and Western Europe, with that of FDI coming from China, whilst accounting for the observation that foreign investors make their decision to invest in African countries in a selective way. The empirical results using FDI stock to 37 African countries during 2003-2012 carefully suggest that American and Western European FDI significantly relate to control of corruption and rule of law in African countries, whereas Chinese foreign investors are not likely to assert significantly influence. The latter finding is in line with China’s non-interference policy. Furthermore, there is some evidence that democracy conditions the effect of FDI. Yet these conclusions are unstable as they depend on the type of estimation, the estimated variables and the included observations in the data sample.