South-South Cooperation and Economic Development

This paper uses FDI inflows from the OECD to distinguish between North-South and South-South investments. An empirical analysis of the case of Africa shows that both have growth-enhancing effects. Theory suggests that the impact from South-South FDI on economic growth may be larger than from North-South FDI since investors from the South are more familiar with local developing markets and business practices, which increases their productivity spillovers. Still the empirical analysis does not find convincing evidence for this hypothesis on the aggregate level.