Moroccan Foreign Direct Investment and Development Outcomes in Senegal: Evidence from South–South Economic Cooperation

Abstract

This study investigates the relationship between Moroccan foreign direct investment (FDI) and human development in Senegal over the period 1990–2022. While the literature on FDI and human development is largely based on cross-country analyses, little empirical evidence has examined the long-run effects of Moroccan FDI within the framework of Morocco–Senegal economic cooperation. This study addresses this gap by assessing the specific contribution of Moroccan FDI to the Human Development Index (HDI) using a country-specific time-series approach that accounts for stationarity, multicollinearity, and reverse causality. The analysis is based on an annual time series of 33 observations. Moroccan FDI inflows are transformed using the inverse hyperbolic sine (IHS) transformation and estimated through Ordinary Least Squares (OLS) regressions with Newey–West heteroskedasticity and autocorrelation consistent (HAC) standard errors. The empirical strategy is complemented by unit root tests (ADF, Phillips–Perron, and KPSS), Granger causality tests, and several robustness checks. The bivariate model reveals a positive and statistically significant association between Moroccan FDI and HDI (β = 0.00279; p < 0.001; R² = 0.177). However, this relationship becomes insignificant once macroeconomic and structural control variables are included. Urbanization emerges as the main determinant of human development (β = 0.0164; p < 0.001; Adjusted R² = 0.977), while first-difference estimations and Granger causality tests provide no evidence of a direct short-run or causal effect of Moroccan FDI on HDI. These findings suggest that Moroccan FDI contributes to human development primarily through broader structural transformation rather than through an autonomous direct effect. The study's main limitation lies in the relatively small sample size and the measurement constraints associated with bilateral FDI data.

Classification JEL : F21, O15, O55, C22.

Paper type : Empirical Research