In Chapter One, I model the interaction between the government of a sub-Saharan African country and foreign providers of financial flows as follows:
The government chooses an economic development strategy and a political regime type
My argument in this project is that government leaders in Africa make decisions about economic policy and changes in political institutions based (in part) on expectations of how those decisions will affect foreign capital flows. In chapters two and three, therefore, I predict expected financial inflows conditional on economic and political choices of African governments. In chapter four the predictions generated in chapters two and three enter the utility function of the government in a random utility model, along with control variables and an error term, to predict the decision of the government regarding economic policy and political institutions. For example, as the expected capital inflows resulting from economic or political liberalization rise, the probability of the government liberalizing increases. In chapter two I address investment flows from private investors who send finance to Africa in order to make a profit. In chapter three I address aid (concessional loans and grants) provided by governments and multilateral institutions in order to alleviate poverty and to influence African governments to pursue favored policies.