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FDI, local Financial Markets, Employment and poverty alleviation


  • Abdelaal Mahmoud, Ashraf


This paper examines the indirect linkages among foreign direct investment (henceforth, FDI) and poverty reduction, where so far there are few studies attempted to analyze empirically these linkages. Yet I have a question: do we believe that FDI inflows are able to contribute to higher growth and employment in poor countries? I argue yes. Behavior of FDI says something fundamental. FDI inflows vary across international borders and condition by host country environment; therefore, FDI can contribute to higher growth and employment in poor countries but only under certain circumstances, “Roll out the red carpet for foreign investors and they will come”. Countries with better financial systems, healthy business environment and human development are able to attract more FDI and exploit it more efficiently. Empirical analysis using panel data of 62 countries, from 1996 to 2007, shows that FDI appears regular to be a key source of employment and has a favorable impact on economic growth of low-income countries if interacted with monetary and non monetary variables.

Suggested Citation

  • Abdelaal Mahmoud, Ashraf, 2010. "FDI, local Financial Markets, Employment and poverty alleviation," MPRA Paper 29717, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:29717

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    References listed on IDEAS

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    Cited by:

    1. Jayasuriya, Dinuk, 2011. "Improvements in the World Bank's ease of doing business rankings : do they translate into greater foreign direct investment inflows ?," Policy Research Working Paper Series 5787, The World Bank.
    2. Dinuk Jayasuriya, 2011. "Improvements in the World Bank's Ease of Doing Business Rankings: Do they translate into greater foreign direct investment inflows?," Development Policy Centre Discussion Papers 1108, Development Policy Centre, Crawford School of Public Policy, The Australian National University.
    3. repec:ebl:ecbull:eb-17-00147 is not listed on IDEAS

    More about this item


    FDI; Financial market; Poverty; Employment.;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration


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