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The Effects of FDI on Growth and Inequality

In: Pro-Poor Macroeconomics

Author

Listed:
  • Chiara Bonassi
  • Giorgia Giovannetti
  • Giorgio Ricchiuti

Abstract

North-South capital flows are likely to allow countries in the South to grow independently from their (low) domestic saving rate, thereby reducing possible financial constraints to growth. They allow the financing of balance-of-payments deficits in the early stages of development, so that a country can import intermediate and capital-intensive goods, which are essential for productive capacity. They improve the allocation of domestic and foreign capital and facilitate the transfer of technology and know-how. Hence, private capital flows have the potential to boost growth and to contribute to improvements in the standard of living in developing countries. This potential does not seem to have been fully exploited yet, especially in African countries.1

Suggested Citation

  • Chiara Bonassi & Giorgia Giovannetti & Giorgio Ricchiuti, 2006. "The Effects of FDI on Growth and Inequality," Social Policy in a Development Context, in: Giovanni Andrea Cornia (ed.), Pro-Poor Macroeconomics, chapter 6, pages 119-143, Palgrave Macmillan.
    • Handle: RePEc:pal:sopchp:978-0-230-62790-1_6
    DOI: 10.1057/9780230627901_6
    as

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