Doctoral Degrees (Economics)

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Browsing Doctoral Degrees (Economics) by Subject "Africa, Sub-Saharan"

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    Foreign and domestic private investments in developing economies : cases in sub-Saharan Africa
    (Stellenbosch : Stellenbosch University, 2020-03) Wabiga, Paul; Rankin, Neil; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Economics.
    ENGLISH ABSTRACT : The role of foreign-owned investments in the economic transformation of host economies cannot be overstated. Foreign-owned investments are associated with higher levels of employment; higher mean wages; technological transfer via spill-overs to domestic firms; high capital and export intensities. Through these positive features, foreign investments are generally associated with positive effects on economic growth. Economies in Sub-Saharan Africa (SSA) have been cognisant of these positive benefits, as is manifested by their national development plans for the near future. As more foreign-owned investments have flowed in the region, there has been visible economic growth, but with dismal effects in terms of employment creation in both numbers and quality. Exportation remains low and the impact on poverty remains mild. These poor results undermine the strength of the supposedly empirical association between foreign-owned investments and economic transformation of typical host economies, at least in SSA. Existing empirical knowledge on the nature of foreign-owned investments in SSA and their likely effects on economic welfare of host economies has either remained scanty or mainly been at the macro level due to limited data. This thesis attempts to sidestep this challenge by utilizing three different firm-level data sets to examine the nature and effects of foreign investments in relation to domestic firms in SSA from a microeconomic perspective. Firstly, a relatively novel, unsupervised, machine-learning approach has been used to classify firms so as to study their characteristic features. In this attempt, firm-level performance features, which have empirically been found by existing studies to distinguish foreign from domestic firms, are re-examined. This inquiry is a robustness check for previous studies and is undertaken from both a one-country and a multi-country perspective. Most studies that have utilised firm-level data to classify firms have in most cases been based on assumptions specified a priori. Using performance indicators such as output, employment and exports, correlation results from these studies are reported based on these classifications. In this thesis, firms are classified and their performance features examined without prior assumptions set especially regarding data distribution. Agglomerative clustering methods have been used to generate groups of firms a posteriori before examining these groups descriptively along performance indicators. Key findings indicate that foreign-owned firms systematically differ from domestically owned firms along numerous performance indicators, while there is a high likelihood of intra-foreign-owned firms’ heterogeneities. In the second and final analysis, this thesis has employed regression and matching techniques with difference-in-differences estimation methods to investigate the existence and nature of effect of foreign ownership on firm-level performance in SSA. This thesis considers foreign ownership arising out of acquisition of a local firm by foreigners. This provides crucial evidence as to whether foreign-owned investments in SSA truly influence host economies’ welfare from a firm-level perspective. Empirical findings in this thesis indicate that, although cream-skimming is prevalent in foreign acquisition of formerly domestically owned firms, foreign ownership has positive effects on firm performance. This thesis finds positive acquisition effects on employment, wages, productivity, output, skill intensity, and capital investments. These positive effects are significant for wages, output, and productivity. By implication, through their effects at firm-level, foreign-owned investments are still a potential channel through which sustained welfare enhancements in SSA can be achieved, given well-intentioned policies being in place.