IDEAS home Printed from
   My bibliography  Save this paper

Foreign Direct Investment: Income Growth for All?


  • Krüger, Ralf
  • Seith, Jennifer


The United Nations declared halving the number of poor people by 2015 as the first of their eight Millennium Development Goals. Foreign direct investment (FDI) is often seen as one instrument towards this goal because of its ability to stimulate economic growth trickling down to the poor. Whereas many studies deal with those growth effects, little attention is paid to possible direct poverty reducing effects. Therefore, we first examine different theoretical direct and indirect ways through which FDI can affect the income of the poor. Wage effects and possible job-creating effects are considered. We find that they depend on the existing human capital and its distribution in society. Following Dollar and Kraay [2000] and Jalilian and Weiss [2001] this hypothesis is confirmed empirically with the use of cross-country regressions for a set of developing countries. In summary, this paper indicates that in developing countries with existing and equally distributed human capital FDI can help fighting poverty whereas in countries with little or very unequally distributed human capital FDI can raise poverty.

Suggested Citation

  • Krüger, Ralf & Seith, Jennifer, 2005. "Foreign Direct Investment: Income Growth for All?," Discussion Papers in Development Economics 33, Justus Liebig University Giessen, Institute for Development Economics.
  • Handle: RePEc:zbw:jluide:33

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:jluide:33. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - Leibniz Information Centre for Economics). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.