A model of foreign direct investment flows at the municipal level in South Africa

Abstract

Purpose

The purpose of this paper is to assess the relationship between South Africa's foreign direct investment (FDI) and economic fundamentals at the municipal level.

Design/methodology/approach

The paper develops a data set and an econometric model to analyze FDI flows at the municipal level in South Africa.

Findings

The empirical results derived from municipal level data support the findings in some of the established literature (which for the most part uses country‐level data) and indicates: that FDI tends to flow to areas with high factor (capital, labour and land) productivity; and that increases in higher labour productivity lead to higher investment.

Research limitations/implications

This paper has used a cross‐section of municipalities. A further area of research would be to carry out a similar exercise with panel data.

Practical implications

These findings indicate that FDI flows can be considered at the municipal level and this justifies the need for careful selection of the geographic basis for economic policy and development planning.

Originality/value

Whereas most studies on FDI use country‐level data as standard geographic units of analysis, this paper analyzes FDI flows at the municipal level.

Citation

Okeahalam, C. and Dowdeswell, M. (2008), "A model of foreign direct investment flows at the municipal level in South Africa", Journal of Modelling in Management, Vol. 3 No. 3, pp. 249-267. https://doi.org/10.1108/17465660810920582