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Does foreign investment reduce poverty? Empirical evidence from Tanzania

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  • Magombeyi, Mercy T
  • Odhiambo, Nicholas M

Abstract

This paper investigates the direct impact of foreign direct investment (FDI) inflows on poverty reductionin Tanzania between 1980 and 2014. The paper attempts to answer one critical question: Does FDI reducepoverty in Tanzania? The study employs three poverty reduction proxies, namely, household consumptionexpenditure (Pov1), infant mortality rate (Pov2), and life expectancy (Pov3). The three poverty reductionproxies have been selected based on the need to capture poverty in its multidimensional nature. Using theautoregressive distributed lag (ARDL) bounds testing approach, the study finds that FDI has a short-runpositive impact on poverty reduction when infant mortality rate is used as a proxy for poverty reduction.However, when infant mortality rate and life expectancy are used as poverty reduction proxies, FDI has noimpact on poverty reduction. This applies irrespective of whether the analysis is conducted in the short runor in the long run. The study, therefore, concludes that the impact of FDI on poverty reduction is sensitiveto the proxy used to measure the level of poverty reduction, and varies over time.

Suggested Citation

  • Magombeyi, Mercy T & Odhiambo, Nicholas M, 2017. "Does foreign investment reduce poverty? Empirical evidence from Tanzania," Working Papers 22562, University of South Africa, Department of Economics.
    • Handle: RePEc:uza:wpaper:22562
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    Cited by:

    1. AIGHEYISI Oziengbe Scott & OLIGBI O. Blessing, 2019. "Trade Openness, Foreign Direct Investment And Life Expectancy In Nigeria," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 351-365, December.
    2. Kunofiwa TSAURAI, 2018. "Investigating The Impact Of Foreign Direct Investment On Poverty Reduction Efforts In Africa," Revista Galega de Economía, University of Santiago de Compostela. Faculty of Economics and Business., vol. 27(2), pages 139-154.
    3. Dhrifi, Abdelhafidh & Jaziri, Raouf & Alnahdi, Saleh, 2020. "Does foreign direct investment and environmental degradation matter for poverty? Evidence from developing countries," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 13-21.
    4. Amina Shahid & Hafiz Muhammad Abubakar Siddique & Rabia Liaqat, 2019. "Human Health and Foreign Direct Investment Nexus: Evidence from South Asia," Asian Development Policy Review, Asian Economic and Social Society, vol. 7(3), pages 209-218, September.

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    More about this item

    Keywords

    Tanzania; Poverty Reduction; Foreign Direct Investment; Household Consumption Expenditure; Infant Mortality Rate; Life Expectancy;
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