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Causal relationship between FDI and poverty reduction in South Africa


  • Magombeyi, Mercy T
  • Odhiambo, Nicholas M


This study investigates the causal relationship between poverty reduction and foreign direct investment (FDI) inflows in South Africa using time-series data from 1980 to 2014. A trivariate framework is used in this analysis, with the addition of real gross domestic product (GDP) as an intermittent variable. Employing the autoregressive distributed lag (ARDL)-bounds testing approach to cointegration and ECM-based causality tests, the results from this study found a distinct unidirectional causality from poverty reduction to FDI in both the short run and the long run when poverty reduction is measured by life expectancy and infant mortality rate. However, the results failed to find any causality, irrespective of the time considered, when poverty reduction is measured by household consumption expenditure. Based on the results from this study, it can be concluded that the causal relationship between FDI and poverty reduction is sensitive to the proxy used to measure the level of poverty reduction.

Suggested Citation

  • Magombeyi, Mercy T & Odhiambo, Nicholas M, 2017. "Causal relationship between FDI and poverty reduction in South Africa," Working Papers 22601, University of South Africa, Department of Economics.
  • Handle: RePEc:uza:wpaper:22601

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    References listed on IDEAS

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    Cited by:

    1. 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.
    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. Temilola Osinubi, Tolulope, 2020. "The Role Of Income Inequality In The Globalisation-Poverty Nexus: Empirical Evidence From Mint Countries," Ilorin Journal of Economic Policy, Department of Economics, University of Ilorin, vol. 7(2), pages 67-89, June.
    4. Chen Gao & Chengcheng J. Fei & Bruce A. McCarl & David J. Leatham, 2020. "Identifying Vulnerable Households Using Machine Learning," Sustainability, MDPI, Open Access Journal, vol. 12(15), pages 1-18, July.

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    South Africa; Household consumption expenditure; Life expectancy; infant mortality;

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