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Globalising Africa: Who Supports Foreign Investment and Why?

Thilo Bodenstein
Central European University
Thilo Bodenstein
Central European University
Open Panel

Abstract

African countries are rapidly integrating into the global economy. International investment into Africa is rising sharply, spearheaded by investment from China. Many African countries improve conditions for foreign direct investment by endorsing structural reforms of their economies and lowering investment barriers. The question his, however, whether greater economic openness is also endorsed by voters. This question matters not only for the future of Africa’s global market integration, but also from a theoretical point of view. Trade theory predicts support for foreign investment, as African countries are mainly endowed with the factor labour. The paper provides a test for this hypothesis based on individual level data for 20 African countries for 2008 from the Afro Barometer using a multilevel model. The results show, however, that the effect of factor endowments on individual trade preferences is strongly influenced by ethnic and regional identities, pointing towards the necessity of taking these context variables into account in order to understand the international political economy of Africa.