Goche o, Plaxedes; Boopen, See anah
A icle
The e ec o mining o eign di ec in es men in low on
he economic g ow h o Zimbabwe
Jou nal o Economic S uc u es
P o ided in Coope a ion wi h:
Pan-Paci ic Associa ion o Inpu -Ou pu S udies (PAPAIOS)
Sugges ed Ci a ion: Goche o, Plaxedes; Boopen, See anah (2020) : The e ec o mining o eign di ec
in es men in low on he economic g ow h o Zimbabwe, Jou nal o Economic S uc u es, ISSN
2193-2409, Sp inge , Heidelbe g, Vol. 9, Iss. 54, pp. 1-17,
h ps://doi.o g/10.1186/s40008-020-00230-4
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The e ec o mining o eign di ec
in es men in low on heeconomic g ow h
o Zimbabwe
Plaxedes Goche o1* and See anah Boopen2
1 In oduc ion
Fo eign di ec in es men (FDI) is c ucial o de eloping na ions like Zimbabwe. I is
e y impo an o indus ial de elopmen because i p o ides a unique combina ion o
long- e m inance, echnology, aining, echnical know-how, manage ial expe ise and
ma ke ing expe ience. Acco ding o Hill (2011), i is a way o exploi ing long- e m p o i
oppo uni ies in a o eign ma ke apa om expo ing and licensing. In di ec in es -
men , he in es o pa icipa es in he con ol and managemen o such business en u e
which is ou side he in es o ’s coun y (Dunning and Lundan 2008).Fo eign i ms se
up plan s o supply he hos coun y`s ma ke as well as he hos na ion`s neighbo ing
coun ies. Fo eign i ms can also in es in o he coun ies o he sake o supply chain
con ol (Demi han and Masca 2008). Manu ac u ing companies ha e a g ea desi e o
con ol he low o ma e ial om supplie s, h ough he alue-adding p ocesses and dis-
ibu ion channels, o cus ome s. FDI c ea es an oppo uni y o de eloping coun ies
o educe dependence on o eign aid which helps in boos ing so e eign y agains dono
policies. Howe e , FDI may also ha e a nega i e e ec which is he eason why some
go e nmen s o de eloped coun ies p e e ee mo emen o capi al and pu e o s on
es ic ing he en ance o o eign in es men (Zilinske 2010). These nega i e e ec s
Abs ac
The s udy employs he au o eg essi e dis ibu ed lag (ARDL) app oach o examine
he ela ionship be ween o eign di ec in es men (FDI) in he mining sec o on he
Zimbabwe economy, while con olling o bo h non-mining FDI and domes ic in es -
men . Using da a o e he pe iod 1988–2018, his esea ch esul s show ha o eign
di ec in es men in he mining sec o has a signi ican posi i e ela ionship wi h he
coun y’s GDP in he long un. Mining FDI is e ealed o ha e ela i ely highe e ec s as
compa ed o FDI in non-mining sec o and domes ic in es men . The sho - un analy-
sis obse ed ha mining FDI as well as non-mining and domes ic in es men s ill has
posi i e and signi ican impac s on g ow h bu a a ela i ely lowe ex en . This implies
ha i akes some ime o such in es men s o ha e hei ull e ec on he economy.
Keywo ds: Fo eign di ec in es men in low, The Zimbabwean mining sec o
Open Access
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RESEARCH
Goche oand Boopen Economic S uc u es (2020) 9:54
h ps://doi.o g/10.1186/s40008-020-00230-4
*Co espondence:
goche [email protected]
1 Open Uni e si y
o Mau i ius, Redui , Moka,
Mau i ius
Full lis o au ho in o ma ion
is a ailable a he end o he
a icle
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Goche oand Boopen Economic S uc u es (2020) 9:54
include inc eased inancial isks, o eign exchange a es c ises, ans e s o obsole e and
di echnologies which a e su e ed by de eloping coun ies (Djoko o and Dzeha 2012).
A ican go e nmen s ha e ied o de elop policies ha encou age inwa d FDI lows.
Despi e e o s by A ican go e nmen s, FDI lows o he con inen con inue o decline.
Uni ed Na ions Con e ence on T ade and De elopmen (UNCTAD) Wo ld In es men
Repo (Wo ld In es men Repo 2017) s a es ha FDI lows o A ica ell by 3 pe cen
om $61 billion in 2015 o $59 billion in 2016, bu wi h a iance ac oss egions and
coun ies. This o e all decline o FDI lows o A ica is la gely a esul o weak commod-
i y p ices. In A ica, many de eloping coun ies had a ge ed 2015 as he yea by which
he millennium de elopmen goals (MDGs) we e o ha e been achie ed; howe e , mos
de eloping coun ies ac oss Sub-Saha an A ica ha e missed he a ge lea ing hem
despe a e o signi ican le els o o eign in es men s o hem o es o e hei ea lie
economic s a us. The belie is ha mos o hese de eloping coun ies a e lagging behind
o he simple eason o no ha ing adequa e esou ces o inance long- e m in es men s
which is a huge se back o economic g ow h (Uni ed Na ions, MDGs Repo 2015).
G ow h e ec s o FDI di e om coun y o coun y because o economic, poli ical
and social di e ences ac oss hese de eloping coun ies. Zimbabwe1 like o he de el-
oping coun ies in A ica has ecei ed FDI o i s de elopmen and is s ill s i ing o
a ac his impo an esou ce low. I is a ac ha Zimbabwe has expe ienced se i-
ous sho ages domes ic in es men o und c i ical inpu s in he a ious g ow h induc-
ing sec o s o he economy, mining sec o included du ing he pas decades, and i is
belie ed ha FDI has been o c i ical suppo o he economy. This implies ha ecei ing
o eign capi al and in es men enables Zimbabwe o make in es men s in human and
physical capi al as well as exploi a ion o oppo uni ies ha o he wise could no be used
o de elopmen .
I is no ewo hy ha since independence in 1980 and ill 1991, he go e nmen o
Zimbabwe was qui e de ensi e is-a- is o eign in es men , and each p oposal was sub-
jec ed o ca e ul sc u iny and o eign in es o s we e equi ed o ge pe mission om he
Fo eign In es men Cen e o he de elopmen o any new en e p ise in he coun y.
In 1991, al hough he e was some e isions o hose egula ions, he emphasis on indi-
geniza ion s ill emained s ong. Poli ical u bulence and he go e nmen ’s de iance o
he IMF in he la e 1990s inc eased in es o isk signi ican ly and subsequen ly, o eign
di ec in es men lows was b ough o a s ands ill. Indeed, in 1998, FDI eached o e
$444 million and by 2001, FDI in low ell hea ily o $5.4 million. FDI lows eco e ed
since 2008 due o he so-called p ocess o economic no maliza ion and he enhancemen
o he coun y’s business clima e, al hough FDI emained a unde hei po en ial. In
2018, o al FDI s ock s ood a USD 5.4 billion and ep esen ed 20.8% o he GDP. The
FDI in lows inc eased signi ican ly o USD 745 million in 2018, compa ed o p e-c isis
pe iod and 2017 (USD 349 million), acco ding o he UNCTAD’s 2019 Wo ld In es -
men Repo . In e es ing o no e om his epo is he ac ha FDI is cu en ly mainly
1 Due o a long d ough , Zimbabwe’s economy slowed down in 2016, bu i eco e ed in 2017 (2,8% o GDP) hanks o
excep ional ag icul u e e u ns. In 2018, he economy pe o med be e han expec ed, eco ding a 3.5% GDP g ow h,
d i en by ag icul u e, suppo ed by ela i ely peace ul elec ions. Fo he nex couple o yea s, g ow h is expec ed o
inc ease and each 4.2% in 2019 and 4.7% in 2020.
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Goche oand Boopen Economic S uc u es (2020) 9:54
in he mining sec o ,2 in as uc u e, he wood indus y heal hca e, wa e and sani a ion,
inancial se ices, ou ism, manu ac u ing, and ag icul u e. China is he i s in es o in
Zimbabwe. Russia, I an and India a e also impo an in es o s in he coun y.
The mining sec o o Zimbabwe’s emains a key d i e o sus ainable economic de el-
opmen . Indeed, his sec o con ibu es a lo o expo s as well as ha ing c ucial in e -
linkages wi h o he sec o s o he economy. FDI in he mining sec o is c i ical o
ca ying ou mine al explo a ion, ex ac ion, p ocessing and ma ke ing because Zimba-
bwe lacks enough capi al and echnological esou ces o inance such capi al in ensi e
la ge-scale p ojec s (Chimuka 2007). I is no ewo hy ha in 2017, he sec o con ib-
u ed abou 10% o GDP and 60% o expo s which is a e y signi ican con ibu ion o
GDP (Go e nmen o Zimbabwe 2017).
This s udy, hus, aims a examining he e ec o o eign di ec in es men in lows in he
Zimbabwean mining sec o on coun y’s economic pe o mance o e he pe iod 1988–
2018. I also akes in o accoun FDI in non-mining sec o and domes ic in es men ,
p o iding addi ional compa a i e insigh s. The esea ch employs dynamic ime se ies
eg ession, namely an ARDL amewo k o model he dynamic FDI–g ow h nexus, while
also analyses bo h he sho - and long- un g ow h e ec s o mining FDI.
The es o he pape is o ganized as ollows: Sec .2 p o ides a b ie e iew o he li -
e a u e, Sec .3 dwells in o he me hodology and analyses he esul s o he eg ession
es ima es while Sec .4 concludes.
2 Li e a u e e iew
2.1 Theo e ical li e a u e one ec s o  o eign di ec in es men onhos coun y ingene al
FDI has g own bo h in ela ion o ade and in absolu e e ms in he las wo decades due
o globaliza ion (Wo ld Economic Fo um 2013). I is e y impo an because i is a majo
sou ce o ex e nal inance ha enables coun ies wi h limi ed amoun s o capi al like
de eloping coun ies o bene i by ecei ing unds om weal hie coun ies. I is impo -
an in ans e ing skills and echnology om he de eloped coun ies o hos coun ies
(Be ge and Diez 2008). Howe e , he e ec o FDI on ans e o echnologies and skills
has been inconclusi e al hough i is belie ed o be sou ces o echnology ans e s ound
in di e en pa s o he wo ld (Fo d e al. 2008). FDI is ega ded a supe io sou ce o cap-
i al because o i s las ing p ospec s as well as mul iple pu poses when compa ed o o he
p i a e capi al sou ces. I has become he la ges componen o ne esou ce lows o
de eloping coun ies since 1994. Adding o he p o ision o new capi al, he e a e many
channels h ough which FDI can boos g ow h a es o example FDI is accep ed as a
means o inco po a e new knowledge om ab oad. This new knowledge is bene icial o
hos coun y as hey imi a e, lea n and inc ease compe i ion in local ma ke . Theo y o
he TNCs s a es ha mul ina ional co po a ions ha e echnology ad an ages o e local
i ms ha ou weigh he cos o doing business in ex e nal ma ke s (Rug a and Hansen
2011). I o e s a long- e m commi men compa ed o o he o ms o inancial in lows
like po olio equi y lows.
2 The coun y has a e y ich na u al po en ial (second la ges ese e o pla inum and ch ome; diamonds, coal, gold,
pla inum, coppe , nickel, in). The o al numbe o p ojec s app o ed by he Zimbabwe In es men Au ho i y o he
pe iod 2016–2018 is, espec i ely, 54 (USD 160m), 60(USD 577) and 135 (USD 1382).
Page 4 o 17
Goche oand Boopen Economic S uc u es (2020) 9:54
Al hough FDI is gi en c edi o posi i e impac on human capi al o ma ion in hos
coun y, he e is ano he side o i . Ma xis poli ical and economic heo y iews T ans
Na ional Co po a ions (TNCs) as an ins umen o impe ialis domina ion. The Ma x-
is ega d TNCs ins i u ions ben on making p o i , epa ia ing i o home coun y and
hese TNCS nei he in end o ans e echnology o hos coun y no play any ole in
employmen c ea ion (Ku ishi-Kas a i 2013). TNCs could b ing obsole e and di y
echnology was he a gumen o Djoko o (2012). Ou da ed obsole e machine y would
be ine icien and inding spa e pa s o such machine y would be di icul . Fu he , di
echnologies con ibu e signi ican ly o en i onmen al pollu ion and deg ada ion lead-
ing o unsus ainable de elopmen , hence de ea ing he ini ial pu pose o he mo e ha is
o a ac FDI (Chambe o Mines 2009).
Acco ding o Mencinge (2008), TNCs some imes hinde he g ow h o indigenous
i ms and monopolize ma ke s because hey a e mo e powe ul. While ini ial e ec s o
FDI on hos coun ies balance o paymen a e usually posi i e in he long un, balance
o paymen is nega i ely a ec ed because o subsequen ou low o ea nings and di es -
men s as well as inc eased impo s o in e media e goods and se ices. To con ol his,
some coun ies es ic o limi p o i epa ia ion by imposing axes and sanc ions.
The ex en o which o eign owned i ms bo ow om domes ic ma ke educes he
bene i s o FDI (Sal a o e 2007). Fo eign i ms bo ow om domes ic ma ke esul ing
in c owding ou o local domes ic in es men as a esul o inc eased in e es a es. This
inc eases he isk o epa ia ion o unds bo owed (İpek and Kizilgöl 2015). Nega i e
e ec s o excessi e bo owing a e ha he en u e becomes mo e isky ending up wi h
hos coun y and no he TNC ca ying he isk o he en u e (Sal a o e 2007). This
si ua ion can esul in he TNC ge ing easie exi in di icul imes in which case FDI
is made mo e oo loose. FDI could b ing inapp op ia e esou ces, asse s and p ac ice
o hos coun y. TNCs also a ec indus y ela ions nega i ely and could own o e en
unde mine he so e eign y o he hos coun y.
Mos li e a u e p omo es he idea ha FDI is bene icial o hos coun ies ( o example,
Mou a 2010). De eloping coun ies a e encou aged o y and acqui e FDI and po olio
equi y in lows o s imula e long- e m g ow h chances a he han limi hemsel es o
na ional sa ings (Wo ld Bank 2017). As a esul , many go e nmen s ha e encou aged
FDI in lows and y as much as possible o gi e incen i es. This shows ha he gene al
belie is ha he posi i es ou weigh he nega i es when de eloping coun ies such as
Zimbabwe decide on FDI issues. Mo eo e , despi e he con adic o y a gumen s, he
need o FDI is ising g adually. Coun y le el and c oss coun y s udies ha e come up
wi h mixed indings on he e ec s o FDI on hos coun y and canno be gene alized
om coun y o coun y o egion o egion. This impac is a unc ion o many ac o s
like mic oeconomic en i onmen , poli ical s abili y and many o he ac o s (Mou a and
Fo e 2013).
Bene i s o o eign di ec in es men s in hos coun y also include enhancemen o
compe i i e business con ibu ion o in e na ional ade in eg a ion and imp o emen
o en e p ise de elopmen (Kas a i 2013; Al a o 2017). Apa om economic bene i s,
FDI is bene icial o hos coun y by imp o ing he en i onmen and social condi ion
in he hos coun y h ough b inging in/ eloca ing cleane echnology as well as guid-
ing he hos coun y o mo e socially esponsible coope a e policies. These bene i s

Page 5 o 17
Goche oand Boopen Economic S uc u es (2020) 9:54
con ibu e o economic g ow h which leads o he alle ia ion o po e y in hese hos
economies, Al a o (2017). Measu ing wi h accu acy, he economic e ec s o FDI a e no
an easy ask since bene i s a y om coun y o coun y, and hence di icul o sepa a e
and measu e. In mos cases, he assessmen o he de elopmen e ec s o FDI is done
ollowing wo app oaches, econome ic analysis o he ela ionship be ween inwa d FDI
and he nume ous aspec s o TNCs impac s o quali a i e analysis o he a ious aspec s
o TNCs e ec s (UNCTAD 2009).
The e is a g oup o heo ies ha p o ide he a ionale o he e ec o FDI on economic
g ow h called he FDI nexus (Helphman and G ossman 1991). An example is ha he
mode n endogenous g ow h heo y shows ha long- un economic g ow h o an econ-
omy can esul om mo e open libe alized go e nmen policies conduci e o FDI
in lows. Capi al highly inc eases e u ns o scale such ha changes in FDI in lows can be
an impo an means o long- un economic g ow h in de eloping coun ies. The o he
g oup o heo ies a emp s o ela e heo e ical conside a ion o he impac o FDI on
he en i onmen in de eloping coun ies. This g oup is known as he FDI en i onmen
nexus (Copeland and Taylo 1994; Po e and Van de Linde 1995). Examples a e he
pollu ion ha en model [Copeland and Taylo (2003) and he Po e ’s hypo hesis, Po e
and Van de Linde (1995)].
2.2 Empi ical li e a u e one ec s o  o eign di ec in es men
2.2.1 E ec o FDI andhos coun y economic g ow h
Economic g ow h can be achie ed when FDI enables employmen o people, b idging
he gap be ween sa ings and in es men s as well as axes. Th ough axes, FDI enhances
capi al o ma ion o he go e nmen and also de uses balance o paymen p essu e;
echnical knowledge, ad ancemen and quali a i e imp o emen s in labo o ce a e also
conside ed as impo an ac o s ha con ibu e o economic g ow h (Mou a and Fo e
2013; Knoe ich 2017). The ac o s ha con ibu e owa ds economic g ow h a e in e -
dependen such ha p og ess in one ac o can acili a e ad ancemen in ano he . Poo
pe o mance in one ac o can hinde p og ess o he ac o s. Fac o s such as hos coun-
y capi al, human capi al, echnology, in as uc u e, ade and p oduc i i y a ec he
e ec o FDI on economic g ow h o hos coun ies (Heliso 2014).
Al hough FDI a ec s hos coun y’s economic g ow h, i seems ha de eloping coun-
ies need o gain a ce ain le el o de elopmen in educa ion and o in as uc u e o
be able o eap he po en ial bene i s ha come h ough FDI. S udies (Heliso 2014)ha e
p o ed ha ce ain condi ions ha e o be me o he posi i e e ec s o be expe ienced.
These condi ions o ac o s include, o example, he le els o human capi al, le els o
educa ion, ade openness in he hos coun y as well as he abili y o abso b echnology
by he hos coun y as al eady men ioned (Noo mamode 2008; Solomon 2011). Ea lie
s udies by Khan (2007) ound ha he same amoun o inc ease in FDI gene a ed h ee
imes mo e addi ional g ow h in inancially well-de eloped hos coun ies han coun-
ies ha a e poo ly de eloped in e ms o inance. Al a o e al. (2007) con ibu ed o
exis ing li e a u e ha emphasizes how local policies and ins i u ions may ac ually limi
he po en ial bene i s ha FDI could p omo e o a hos coun y. They concluded ha ,
local condi ions such as he de elopmen o inancial ma ke s and educa ional le el o
he coun y a ec s he impac o FDI on economic g ow h. They also ecommended ha
Page 6 o 17
Goche oand Boopen Economic S uc u es (2020) 9:54
policy make s should exe cise cau ion when ying o a ac FDI ha is complimen a y
o local p oduc ion.
The issue o echnology has also been emphasized (Be ge and Diez 2008). The smalle
he echnology gaps be ween he hos and he home coun y, he la ge he impac o FDI
on economic g ow h. This implies ha coun ies ha a e less echnologically ad anced
may, he e o e, ha e a limi ed FDI impac on economic g ow h (OECD 2002). Technol-
ogy is impo an especially o small coun ies ha ely on expo pe o mance in o de
o hem o imp o e hei expo composi ion. The s eng h o expo pe o mance o a
la ge ex en depends on echnology (Sandua and Ciocanelb 2014). Apa om p omo -
ing hos coun y’s g ow h h ough p oduc ion o new/ad ancemen echnology, FDI also
enables he hos coun y o ha e a g ea e ou pu om any combina ion o inpu (OECD
2002).
Empi ical s udies examining he FDI–G ow h nexus, using di e en da a and me h-
odologies, ha e ound ha FDI ends o ha e posi i e impac s on economic g ow h
(Kooja oenp asi , 2012; Melnyk e al. 2014; Mun ah e al. 2015; among o he s).O he
s udies came up wi h con as ing esul s o he e ec ha FDI ends o ha e non-sig-
ni ican o e en nega i e impac s on economic g ow h in hos coun ies (Ja o cik 2004;
Ru anga and Kabe uka 2013). S udies on de eloped coun ies show posi i e e ec s in
gene al, ye hose on de eloping coun ies a e usually inconsis en p oducing posi i e
e ec s, nega i e e ec s o no e ec s (Beugelsdijk e al. 2008; Demissie, 2015).
Noy and Vu (2007) applied sec o ial FDI in low da a o e alua e he sec o -speci ic
impac o FDI on g ow h. The esul s exhibi ed ha , o he wo de eloping ansi ions
economies China and Vie nam, FDI has a posi i e s a is ically signi ican e ec on eco-
nomic g ow h ope a ing di ec ly and indi ec ly h ough i s in e ac ion wi h labo in
hose sec o s. The esul s we e di e en ac oss economic sec o s wi h almos all ben-
e icial impac limi ed o indus ial sec o . The o he sec o s appea ed o gain li le om
he sec o -speci ic FDI and mining was concluded o be he leas bene icia y. As a gued
by Fo aine (2003), he de e minan s and e ec s o such FDI need o be con ex ualized.
Indeed, esul s p o ided by Noy and Vu (2007) a e a guably esul s om a coun y wi h
low o ze o diamonds which is no anywhe e close o Zimbabwe which apa om ha -
ing 38 o he mine als claims o ha e a qua e o he wo ld’s ge m and o be he hi d
la ges p oduce o pla inum ollowing Sou h A ica and Russia, hence he need o seek a
deepe insigh in o his deba e.
Al a o e al. (2007, 2016) and Fasanya (2012) ecommended ha , o coun ies o e ec-
i ely eap he bene i s o FDI, he e is a need o p ope economic planning ha c e-
a es a heal h and enabling business en i onmen o encou age bo h o eign and local
in es o s. P o iding incen i es o inno a ion and skills imp o emen ha con ibu es
o compe i i e co po a e clima e has been p oposed by mos o he schola s who ha e
s udied FDI and economic g ow h in any way. Howe e , wha mos o hem did no
add ess is, which sec o hese policies should a ge a ques ion ha has been a emp ed
by a ew esea che s (Vu e al. 2006; Khaliq and Noy 2007).
Khaliq and Noy (2007) s udied he impac o FDI on economic g ow h in Indonesia in
di e en sec o s using FDI da a om 1997 o 2006. Al hough he s udy concluded ha
a agg ega e le el, FDI does ha e a posi i e e ec on he economic g ow h, a sec o ial
le el, he e ec s o FDI and economic g ow h a y ac oss sec o s and ha e no agg ega e
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Goche oand Boopen Economic S uc u es (2020) 9:54
e ec s. They also made simila obse a ions o hose o Noy and Vu (2007), in ha FDI
in he mining sec o had nega i e e ec s on he economic g ow h. These esul s con-
i med he a gumen ha ex ac i e FDI migh no enhance economic g ow h by Vu,
e al. (2006) b inging doub o he expec ed gene al bene i s o FDI in lows.
Moyo (2013) s udied he de e minan s o FDI in he pos dolla iza ion pe iod o 2009–
2012 using mon hly da a. The au ho used a mul iple eg ession model ha linked FDI
as well as o he mac oeconomic a iables such as go e nmen expendi u e and p i a e
sa ing o g oss domes ic p oduc . I should also be no ed ha he s udy was based only
on mac o-FDI da a. Tha da a we e based on he whole na ion and no sec o s which is
he scope o his s udy. The s udy concluded ha FDI o eign di ec in es men had a
signi ican posi i e impac on economic g ow h in he coun y.
The e a e models which sugges ha FDI leads o p omo ion o economic g ow h only
unde ce ain condi ions. Mou a and Fo e (2013) s udy concluded ha he e ec s o
FDI on economic g ow h a e dependen on exis ing o subsequen ly de eloped in e nal
condi ions o he hos coun y’s economic, poli ical, social, and cul u al which is in line
wi h he eclec ic heo y o Dunning (1993). They main ain ha local au ho i ies ha e a
ole o play o achie e he desi ed e ec s and i is he go e nmen s ha should design
policies ha a e app op ia e o a coun y o enjoy he posi i e e ec s o FDI and mi i-
ga e he nega i e e ec s. Mou a and Fo e (2013) a gues ha he local au ho i ies ha e
o be p oac i e abou a ac ing and di ec ing FDI i he a ious sec o s o he economy
a e o bene i om i , a con ibu ion which was di e en om hose by o he schola s
men ioned ea lie .
Hong (2014) employed GMM o e-e alua e he e ec o FDI on he economic g ow h
in China and he ele an ac o o FDI du ing he pe iod 1994–2010, based on dynamic
panel da a om 254 p e ec u e-le el ci ies in China. The esul s we e ha FDI exe
posi i e impac on he economic de elopmen . I was u he epo ed ha economies
o scale, human capi al, in as uc u e le el, wage le els, egional di e ences in e ac
ac i ely wi h FDI and p omo e economic g ow h in China, while he openness o ade
does no induce FDI signi ican ly. Hong (2014) also concluded ha i is likely ha FDI
has c owded ou he domes ic capi al and le he domes ic capi al and huge o eign
exchange ese es wi h he p oblem o a ional usage. Maliwa and Nyambe (2015) sub-
sequen ly s udied he impac o FDI on economic g ow h in Zambia. They used da a
om Wo ld Bank de elopmen indica o s 1980–2012. The indings we e ha FDI does
no g ange cause economic g ow h in Zambia. The implica ion was ha unless he
Zambian go e nmen conside s e o ming policies, FDI will no se e as he p elude o
he desi ed economic g ow h.
Zeka ias (2016) analyzed he impac o FDI on Economic g ow h in 14 Eas e n A ica
coun ies by employing 34yea s (1980–2013) panel da a, using dynamic GMM es ima-
o s a e checking o au oco ela ion and model speci ica ion es s. The indings con-
i m ha FDI is a key de i e o economic g ow h and a ca alys o economic condi ional
con e gence in Eas e n A ica; so, he sub- egion needs o a ac mo e FDI by imp o -
ing in es men en i onmen , s eng hening egional in eg a ion, de eloping human cap-
i al and basic in as uc u e, and p omo ing expo -o ien ed in es men . Baka i (2017)
also in es iga ed he ela ionship be ween domes ic in es men and economic g ow h
in Malaysia. Annual da a o he pe iods be ween 1960 and 2015 we e es ed using
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Goche oand Boopen Economic S uc u es (2020) 9:54
Co ela ion analysis, Johansen coin eg a ion analysis o Vec o E o Co ec ion Model
and he G ange -Causali y es s. Resul o he analysis p o ed ha he e is a posi i e
e ec o domes ic in es men , expo s and labo s on economic g ow h in he long un;
howe e , he e is no ela ionship be ween domes ic in es men and economic g ow h in
he sho - un e m.
A summa y o he li e a u e shows ha no much empi ical s udies ha e been ca ied
ou on he e ec s o sec o ial, pa icula ly o he mining sec o , o eign di ec in es -
men in low on he economic g ow h. Neglec ing sec o ial s udies on e ec s o FDI
migh be he explana ion as o why some economies a e ye o eap he ull ui s o FDI.
Mo eo e , exis ing s udies ha e in gene al igno ed he issue o dynamism, an elemen
which emain c ucial in he FDI–g ow h modeling.
3 Me hodology andanalysis
3.1 Concep ual amewo k
The concep ual amewo k is based on an augmen ed Cobb Douglas model oo ed in
he endogenous g ow h heo y. Indeed, om he basic Cobb Douglas model, he ou pu
le el o he coun y is dependen on capi al and labo . The capi al componen in ou
case is b oken down in o domes ic and FDI, wi h FDI u he seg ega ed in o Mining
and Non-mining FDI, allowing us o es ima e he e ec o Mining FDI which is o in e -
es o his s udy. Mo eo e , he Cobb Douglas model is ex ended o include a ew o he
de e mining ac o s o g ow h such as educa ion, openness le el and inancial de elop-
men . Simila app oach has been used by Khada oo and See anah (2008), Mou a and
Fo e (2013), See anah and Tee oo engaum (2019) in hei s udies o economic g ow h.
I is o be no ed ha he ocal poin o his s udy is o assess he e ec o FDI in he min-
ing indus y on he coun y’s g ow h.
Capi al is, hus, disagg ega ed in o domes ic and FDI in he i s ins ance, and subse-
quen ly FDI is decoupled in o mining and non-mining capi al. The esul ing p oduc ion
speci ica ion is:
The Cobb–Douglas unc ion is bo h homo he ic and s ongly sepa able.
Y deno es he economy’s ou pu , A is he shi in he p oduc ion unc ion a ibu ed
o echnical p og ess, which is assumed o be isk neu al, K is he domes ic in es men ,
L is labo , FDIM is he FDI in he mining sec o , and FDINM is he FDI in he non-
mining. In such a se -up, an inc ease in his capi al aises ou pu h ough i s posi i e
e ec on he ma ginal p oduc i i y o capi al and labo . The impo ance o FDI has been
discussed ea lie in he pape .
The Cobb–Douglas p oduc ion unc ion has a numbe o con enien p ope ies. The
pa ame e s o he explana o y a iables measu e he elas ici ies o ou pu . The pa am-
e e A may be ega ded as an e iciency pa ame e , since o ixed inpu s K and L, he
la ge is A, he g ea e is he maximum ou pu ob ainable om such inpu s.
Equa ion(1) is linea ized by applying na u al loga i hm on bo h sides. By allowing a
s ochas ic dis u bance e m o en e he p oduc ion echnology, he ollowing log-linea
eg ession equa ion is ob ained om Eq.(2).
(1)
Y
=
A (K )β1(FDIM )β2(FDINM )β3(L )β4.
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Goche oand Boopen Economic S uc u es (2020) 9:54
Recei ed: 24 Janua y 2019 Re ised: 19 Ma ch 2020 Accep ed: 19 Sep embe 2020
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