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Fdi And Poverty Reduction: A Critical Reappraisal Of The Arguments

  • Andrew MOLD

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

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.

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File URL: http://region-developpement.univ-tln.fr/fr/pdf/R20/R20_Mold.pdf
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Article provided by Region et Developpement, LEAD, Universite du Sud - Toulon Var in its journal Region et Developpement.

Volume (Year): 20 (2004)
Issue (Month): ()
Pages: 91-122

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Handle: RePEc:tou:journl:v:20:y:2004:p:91-122
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  1. Stamp, Maxwell, 1974. "Has foreign capital still a role to play in development?," World Development, Elsevier, vol. 2(2), pages 123-129, February.
  2. Narula,Rajneesh, 2004. "Understanding absorptive capacities in an "innovation systems" context: consequences for economic and employment growth," Research Memorandum 004, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  3. Eduardo Borensztein & Jose De Gregorio & Jong-Wha Lee, 1995. "How Does Foreign Direct Investment Affect Economic Growth?," NBER Working Papers 5057, National Bureau of Economic Research, Inc.
  4. Branko Milanovic, 2003. "CAN WE DISCERN THE EFFECT OF GLOBALIZATION ON INCOME DISTRIBUTION? Evidence from Household Budget Surveys," International Trade 0303004, EconWPA.
  5. Ajit SINGH, 2002. "Competition And Competition Policy In Emerging Markets: International And Developmental Dimensions," G-24 Discussion Papers 18, United Nations Conference on Trade and Development.
  6. Klein, Michael & Aaron, Carl & Hadjimichael, Bita, 2001. "Foreign direct investment and poverty reduction," Policy Research Working Paper Series 2613, The World Bank.
  7. Manuel Agosin & Roberto Machado, 2005. "Foreign Investment in Developing Countries: Does it Crowd in Domestic Investment?," Oxford Development Studies, Taylor & Francis Journals, vol. 33(2), pages 149-162.
  8. Barja, Gover & Urquiola, Miguel, 2001. "Capitalization, Regulation and the Poor: Access to Basic Services in Bolivia," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  9. Branko Milanovic, 2005. "Can We Discern the Effect of Globalization on Income Distribution? Evidence from Household Surveys," World Bank Economic Review, World Bank Group, vol. 19(1), pages 21-44.
  10. Saggi, Kamal, 2000. "Trade, foreign direct investment, and international technology transfer : a survey," Policy Research Working Paper Series 2349, The World Bank.
  11. Robert E. Lipsey, 2001. "Foreign Direct Investors in Three Financial Crises," NBER Working Papers 8084, National Bureau of Economic Research, Inc.
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