The authors use a panel data fixed effect model to identify the determinants of foreign direct investment (FDI) for a large sample of 29 sub-Saharan African countries from 1980 to 2003. They test whether human capital development, defined by either literacy rates or economic freedom, and the incidence of war affect FDI flows to these countries. Combining these explanatory variables to several widely used control variables, it was found that the literacy rate (human capital), freedom (political rights and civil rights) and the incidence of war are important FDI determinants. The results confirm our expected signs: FDI inflows respond positively to the literacy rate and to improvements in political rights and civil liberties; war events, by contrast, exert strong negative effects on FDI. For robustness, the model is estimated for religious groupings of sub-Saharan African countries.

In December 1993, restrictions to foreign ownership across major Mexican economic sectors were abolished. This paper studies output, industrialization intensity, "international infrastructure", and government expenditures on infrastructure as determinants of FDI inflows into Mexican states over 1994-2001. We conduct a "general to specific" estimation strategy across Mexican states. Telephone lines appear to be very important to FDI as their coefficients are around 2.0 in Random Effects Models. Industrialization is also important, with coefficients varying from 0.62 to 0.67. Allowing for endogeneity between FDI and real output, dynamic GMM panels confirm the robust effects of telephone lines on FDI. International infrastructure thus appears more conducive to FDI than domestic infrastructure, such as interstate and secondary roads. With international infrastructure being a major catalyst of FDI inflows into Mexico, we provide support to ongoing conventional wisdom promoting such type of investment.