Does foreign direct investment in Ghana promote welfare?

Abstract

Beyond the economic indicators of development is the welfare of citizens. This paper assessed the effect offoreign direct investment on welfare (human development) in Ghana. Unlike other studies on the subject that didnot account for the unit interval property of the human development index (between 0 and 1 inclusive), wedeparted from existing studies on the welfare effects of foreign direct investment by accounting for the unitinterval property (between 0 and 1, inclusive) of the human development index. Unlike country-specific studieson the subject that used time-series data with the associated time series modelling, we employed an unbalancedpanel data of 41 countries in Africa over the period 1990 to 2019. We relied on the elasticities of the generalisedestimation equations and isolated the effect of Ghana. Following the elasticities of the generalised estimationequations, the partial effect of foreign direct investment on welfare in Ghana was not statistically significant. Thetotal effect of foreign direct investment on welfare in Ghana was also found to be statistically insignificant.Further, the total effect of foreign direct investment on welfare in other African countries was found to be sta tistically insignificant. Ghana and other African countries should re-assess their foreign direct investment policiesvis-`a-vis their effect on welfare. The interaction of policy could produce different results and can be researchedsubsequently.