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Foreign direct investment and poverty reduction

Author

Listed:
  • Klein, Michael
  • Aaron, Carl
  • Hadjimichael, Bita

Abstract

Foreign direct investment is a key ingredient of successful economic growth and development in developing countries--partly because the very essence of economic development is the rapid and efficient transfer and cross-border adoption of"best practices."Foreign direct investment is especially well suited to effecting this transfer and translating it into broad-based growth, not least by upgrading human capital. Growth is the single most important factor in poverty reduction, so foreign direct investment is also central to achieving that important World Bank goal. Government-led programs that improve social safety nets and explicitly redistribute assets and income might direct more of the fruits of growth to the poor. But these are complements--not alternatives--to sensible growth-oriented policies. And growth is needed to fund these government-led programs. Moreover, the delivery of social servicesto the poor--from insurance schemes to such basic services as water and energy--can clearly benefit from reliance on foreign investors. In short, foreign direct investment remains one of the most effective tools in the fight against poverty.

Suggested Citation

  • Klein, Michael & Aaron, Carl & Hadjimichael, Bita, 2001. "Foreign direct investment and poverty reduction," Policy Research Working Paper Series 2613, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2613
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    References listed on IDEAS

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    Cited by:

    1. Godbertha Kinyondo & Margaret Mabugu, 2008. "The General Equilibrium Effects of a Productivity Increase on the Economy and Gender in South Africa," Working Papers 200801, University of Pretoria, Department of Economics.
    2. 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.
    3. Jennifer Tobin & Susan Rose-Ackerman, 2003. "Foreign Direct Investment and the Business Environment in Developing Countries: the Impact of Bilateral Investment Treaties," William Davidson Institute Working Papers Series 587, William Davidson Institute at the University of Michigan.
    4. de Soysa, Indra & Neumayer, Eric, 2005. "False Prophet, or Genuine Savior? Assessing the Effects of Economic Openness on Sustainable Development, 1980 99," International Organization, Cambridge University Press, vol. 59(03), pages 731-772, July.
    5. Indra de Soysa & Eric Neumayer, 2004. "False Prophet, or Genuine Savior? Assessing the Effects of Economic Openness on Sustainable Development, 1980–1999," International Trade 0409001, EconWPA, revised 13 Oct 2004.
    6. Nidhiya Menon & Paroma Sanyal, 2007. "Labor Conflict and Foreign Investments: An Analysis of FDI in India," Review of Development Economics, Wiley Blackwell, pages 629-644.
    7. Johan F.M. Swinnen & Anneleen Vandeplas, 2010. "Market power and rents in global supply chains," Agricultural Economics, International Association of Agricultural Economists, pages 109-120.
    8. Chowdhury, Abdur R. & Mavrotas, George, 2005. "FDI and Growth: A Causal Relationship," WIDER Working Paper Series 025, World Institute for Development Economic Research (UNU-WIDER).
    9. Alvaro Pereira & João Jalles & Martin Andresen, 2012. "Structural change and foreign direct investment: globalization and regional economic integration," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 11(1), pages 35-82, April.
    10. Nunnenkamp, Peter, 2004. "Wachstumseffekte von Direktinvestitionen in Entwicklungsländern: warum hohe Erwartungen häufig enttäuscht werden," Open Access Publications from Kiel Institute for the World Economy 3217, Kiel Institute for the World Economy (IfW).
    11. Tsai, Pan-Long & Huang, Chao-Hsi, 2007. "Openness, Growth and Poverty: The Case of Taiwan," World Development, Elsevier, vol. 35(11), pages 1858-1871, November.
    12. Magombeyi, Mercy Tsitsi & Odhiambo, Nicholas Mbaya, 2017. "Dynamic impact of FDI inflows on poverty reduction:Empirical evidence from South Africa," Working Papers 22006, University of South Africa, Department of Economics.
    13. Ahsen Mukhtar & Muhammad Asif & Ghamz-e-Ali Siyal & Khalid Zaman, 2014. "Institutional-Macroeconomic Nexus: Inducement on Foreign Direct Investment (FDI) in Pakistan," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 2(11), pages 465-479, November.
    14. Miet Maertens & Liesbeth Colen & Johan F. M. Swinnen, 2011. "Globalisation and poverty in Senegal: a worst case scenario?," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 38(1), pages 31-54, March.
    15. Gheorghe Zaman, 2012. "Ways Of Improving Foreign Direct Investment (Fdi) Contribution To Romania‘S Sustainable Development," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(14), pages 1-30.
    16. Karimi, Mohammad Sharif & Yusop, Zulkornain, 2009. "FDI and Economic Growth in Malaysia," MPRA Paper 14999, University Library of Munich, Germany.
    17. Neuenkirch, Matthias & Neumeier, Florian, 2016. "The impact of US sanctions on poverty," Journal of Development Economics, Elsevier, vol. 121(C), pages 110-119.
    18. Chirculescu Maria Felicia, 2015. "Analysis Of Foreign Investments In Romania And Their Orientation," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 4, pages 289-295, August.
    19. Busse, Matthias, 2002. "Do transnational corporations care about labour standards?," HWWA Discussion Papers 182, Hamburg Institute of International Economics (HWWA).
    20. World Bank, 2003. "A Medium-Term Macroeconomic Strategy for Algeria : Sustaining Faster Growth with Economic and Social Stability, Volume 1. Main Report," World Bank Other Operational Studies 14999, The World Bank.
    21. Lahimer, Noomen, 2009. "La contribution des investissements directs étrangers à la réduction de la pauvreté en Afrique subsaharienne," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/1167 edited by Goaied, Mohamed & Bienaymé, Alain.
    22. Nunnenkamp, Peter & Thiele, Rainer, 2004. "Strategien zur Bekämpfung der weltweiten Armut: Irrwege, Umwege und Auswege," Kiel Discussion Papers 407, Kiel Institute for the World Economy (IfW).
    23. Andrew MOLD, 2004. "Fdi And Poverty Reduction: A Critical Reappraisal Of The Arguments," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 20, pages 91-122.
    24. Chao-Hsi Huang & Kai-Fang Teng & Pan-Long Tsai, 2010. "Inward and outward foreign direct investment and poverty: East Asia vs. Latin America," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 146(4), pages 763-779, December.
    25. Adenaeuer, Lucie, 2012. "The Impact Of Foreign Direct Investment (Fdi) On The Future Sustainable Development Of Ethiopia," 52nd Annual Conference, Stuttgart, Germany, September 26-28, 2012 137162, German Association of Agricultural Economists (GEWISOLA).

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