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Fdi And Poverty Reduction: A Critical Reappraisal Of The Arguments

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  • Andrew MOLD

    (Trade and Regional Integration Division, Economic Commission for Africa, Addis Ababa)

Abstract

Over the last two decades, enormous efforts have been made by developing countries to attract Foreign Direct Investment (FDI). It is commonly agreed upon that, by accelerating economic growth, FDI is a determining feature in poverty reduction. This paper argues that this view needs to be qualified by considering the stylistic facts and existing empirical evidence on the contribution of FDI to growth and poverty reduction. Echoing work by trade economists on the impact of trade on poverty reduction, a simplified framework is suggested which breaks down the influence of FDI into its "growth enhancing" and "distributional" effects. Contrary to the (now) conventional wisdom, little evidence is found that FDI is a major instrument for poverty reduction.

Suggested Citation

  • Andrew MOLD, 2004. "Fdi And Poverty Reduction: A Critical Reappraisal Of The Arguments," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 20, pages 91-122.
    • Handle: RePEc:tou:journl:v:20:y:2004:p:91-122
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    References listed on IDEAS

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    Cited by:

    1. Andrew Mold and Annalisa Prizzon, 2010. "Fragile States, Commodity Booms And Export Performance: An Analysis Of The Sub-Saharan African Case," RSCAS Working Papers 2010/21, European University Institute.
    2. Dhahri, Sabrine & Omri, Anis, 2020. "Foreign capital towards SDGs 1 & 2—Ending Poverty and hunger: The role of agricultural production," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 208-221.
    3. McLaren, John & Yoo, Myunghwan, 2017. "FDI and inequality in Vietnam: An approach with census data," Journal of Asian Economics, Elsevier, vol. 48(C), pages 134-147.
    4. Inoue, Takeshi, 2018. "Financial development, remittances, and poverty reduction: Empirical evidence from a macroeconomic viewpoint," Journal of Economics and Business, Elsevier, vol. 96(C), pages 59-68.
    5. Marinela GEAMANU & Lavinia Stefania TOTAN & Barbu Bogdan POPESCU, 2014. "The impact of FDI on economic growth in Romania and EU countries during the current economic crisis," Romanian Statistical Review, Romanian Statistical Review, vol. 62(1), pages 35-43, March.
    6. Quynh Anh Do & Quoc Hoi Le & Thanh Duong Nguyen & Van Anh Vu & Lan Huong Tran & Cuc Thi Thu Nguyen, 2021. "Spatial Impact of Foreign Direct Investment on Poverty Reduction in Vietnam," JRFM, MDPI, vol. 14(7), pages 1-16, June.
    7. Gheorghe Zaman, 2012. "Ways Of Improving Foreign Direct Investment (Fdi) Contribution To Romania'S Sustainable Development," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(14), pages 1-30.
    8. Léonce Ndikumana & Sher Verick, 2007. "The Linkages between FDI and Domestic Investment: Unravelling the Developmental Impact of Foreign Investment," UMASS Amherst Economics Working Papers 2007-13, University of Massachusetts Amherst, Department of Economics.
    9. Buckley, Rita, 2001. "The Impact of Foreign Direct Investment on the Profitability of the Software Sector in Ireland," Conference papers 330931, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    10. Van Der Sluis, E. & Durowah, O., 2018. "Aid for Trade and Foreign Direct Investment: Effects on Poverty Reduction," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277307, International Association of Agricultural Economists.
    11. Ndikumana, Leonce & Verick, Sher, 2008. "The Linkages between FDI and Domestic Investment: Unravelling the Developmental Impact of Foreign Investment in Sub-Saharan Africa," IZA Discussion Papers 3296, Institute of Labor Economics (IZA).
    12. Migbaru A. Workneh, 2020. "Gender Inequality, Governance, and Poverty in Sub‐Saharan Africa," Poverty & Public Policy, John Wiley & Sons, vol. 12(2), pages 150-174, June.

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    More about this item

    Keywords

    FOREIGN DIRECT INVESTMENT; POVERTY REDUCTION; LEAST DEVELOPED COUNTRIES; MULTINATIONALS;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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