Abdelaal Mahmoud, Ashraf (2010): FDI, local Financial Markets, Employment and poverty alleviation. Published in: DEVELOPMENT ECONOMICS eJOURNAL , Vol. Vol. 2, No. 134 (30. July 2010)
Download (695kB) | Preview
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.
|Item Type:||MPRA Paper|
|Commentary on:||Abdel Aal Mahmoud, Ashraf (2010): FDI, local Financial Markets, employment and poverty alleviation.|
|Original Title:||FDI, local Financial Markets, Employment and poverty alleviation|
|Keywords:||FDI; Financial market; Poverty; Employment.|
|Subjects:||E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity
F - International Economics > F0 - General > F02 - International Economic Order and Integration
O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies
I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I32 - Measurement and Analysis of Poverty
F - International Economics > F3 - International Finance > F36 - Financial Aspects of Economic Integration
|Depositing User:||Abdelaal mahmoud|
|Date Deposited:||25. Apr 2011 23:35|
|Last Modified:||19. Feb 2013 10:41|
Aaron, C. (1999:23) “The contribution of FDI to poverty alleviation” Report, the Foreign Investment Advisory Service, Singapore
Alfaro L, Chanda A, Kalemli-Ozcan S, Sayek S (2004:467) FDI and economic growth: the role of local financial markets. Journal of international Economics 64:89–112
Balasubramanyam, M. Salisu and David Sapsfor (1996:679), ‘’Foreign Direct Investment and Growth in EP and IS Countries’’ The Economic Journal, No. 106, pp. 92-105
Barro, Robert (1991:7780). Economic Growth in a Cross Section of Countries, the Quarterly Journal of Economics, 106: 407-43.
Barro, R., Sala-i-Martin, X., (1997:426). Technology diffusion, convergence and growth, Journal of Economic Growth 2, 1–26
Barro, R.J. and Becker, G.S. (1989:495). Fertility choice in a model of economic growth, Econometrica 57(2): 481-501.
Beck, T., Levine, R., and N. Loyaza (2000:1433). Finance and the Sources of Growth, Journal of Financial Economics 58, 261–300.
Becker, G.S., Murphy, K.M. and Tamura, R. (1990:1228). Human capital, fertility, and economic growth’, Journal of Political Economy, 98(5): S12-S37.
Berg, Andrew and Krueger, Anne, (2003:10). Trade, Growth, and Poverty: A Selective Survey IMF Working Paper, Vol., pp. 1-51, 2003
Bhargava, A., Jamison, D., Lau, L., & Murray, C. (2001:241). Modeling the effects of health on economic growth, Journal of Health Economics, 20(3), 423–440
Blonigen, B. A., & Wang, M. (2004:157). Inappropriate pooling of wealthy and poor countries in empirical FDI studies, NBER Working Paper No. 10378. http://www.nber.org/papers/w10378.pdf.
Bloom, D. E., Canning, D., & Sevilla, J. (2004:236). The effect of health on economic growth: A production function approach. World Development, 32(1), 1–13.
Bloom, D. E., Canning, D., & Jamison, D. (2004:81). Health, wealth and welfare, Finance and Development, 41(1), 10–15
Bloom, D. E. (2005:9). Education and public health: Mutual challenges worldwide. Comparative Education Review, 49(4), 437–451.
Blomstrom, Magnus, and Ari Kokko (1997:136). The Impact of Foreign Investment on Host Countries: A Review of the Empirical Evidence, Policy Research Working Paper 1745. Washington DC: World Bank.
Caves, Richard E, (1974:925). Multinational Firms, Competition, and Productivity in Host-Country Markets, the London School of Economics and Political Science
Caves, Richard E. (1998:1116). Industrial Organization and New Findings on the Turnover and Mobility of Firms, Journal of Economic Literature, 36(4) Chee-Keong Choong & Zulkornain Yusop & Siew-Choo Soo, (2005:11). Foreign Direct Investment and Economic Growth in Malaysia: The Role of Domestic Financial Sector, the Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 50(02), pages 245-268
Claessens, S., and L. Laeven, (2003:328), Financial Development, Property Rights, and Growth, Journal of Finance
Cotton, L and V Ramachandran, (2001:10), Foreign Direct Investment in Emerging Economies: Lessons from sub-Saharan Africa, WIDER Discussion Paper No. 2001/82
Davis E.P., Karim D., (2008:26), Comparing early warning systems for banking crises, Journal of Financial Stability, 4, 89-120.
Deininger, K. dan L.Squire (1996:2002), A New Data Set for Measuring Income Inequality, The World Bank Economic Review, No.10.
De Mello, M. (1996:25) “Foreign Direct Investment, International Knowledge Transfers and Endogenous Growth: Time Series Evidence, Department of Economics - University of Kent, Kent.
De Mello L. R. (1999:393). Foreign direct investment-led growth: evidence from time series and panel data, Oxford Economic Papers, No. 51, pp. 133-151.
Dees, Stephane, (1998:120). Foreign Direct Investment in China: Determinants and Effects, Economic Change and Restructuring, Springer, vol. 31(2-3), pages 175-94.
Dehejia, Rajeev H. and Roberta Gatti, (2002:78) . Child Labor: The Role of Income Variability and Access to Credit in a Cross Section of Countries, World Bank Policy Research Working Paper 2767.
Demirguc-Kunt A., Detragiache E., (1998:769). The Determinants of Banking Crises in Developing and Developed Countries, IMF Staff Papers, 45, 81-109.
Dollar, David, and Aart Kraay (2001:2260). Growth is good for the Poor. Washington DC: World Bank, Development Research Group
Durham, J. B. (2004:154). Absorptive Capacity and the Effects of Foreign Direct Investment and Equity Foreign Portfolio Investment on Economic Growth, European Economic Review, 48, 285–306.
Erdil, E. and Yetkiner, I.H. (2008:1), The Granger-causality between health care expenditure and output: a panel data approach, Applied Economics, first published on 23 June 2008.
Filer, R., O. Schneider and J. Svejnar (1995:7). Wage and non-wage labour cost in the Czech Republic: The impact of fringe benefits, CERGE-EI Working Paper No. 77,
George Papaconstantinou, (1995) “Globalisation, Technology, and Employment: Characteristics and Trends,” STI Review, No. 15, 1995, p.177.
Greenwood J, Jovanovic B (1990:1346). Financial development, growth, and the distribution of income, Journal of Political Economy 98:1076–1107
Globerman, S., & Shapiro, D. (2002:154). Global foreign direct investment flows: The role of governance infrastructure. World Development, 30(11), 1899–1919.
Gurley JG, Shaw ES (1955:606), financial aspects of economic development, American Economic Review 45:515–538
Goldsmith RW (1969), financial structure and development. Yale University Press, New Haven
Hermes, Niels and Lensink, Robert (2003:129) 'Foreign direct investment, financial development and economic growth', Journal of Development Studies
Hicks JR (1969), a theory of economic history, Oxford University Press, Oxford
Hurlin C, Venet B.(2001:77). Granger causality tests in panel data models with fixed coefficients. Working Paper EURIsCO Universit´e Paris IX Dauphin
James Ang, (2009:6). "Financial development and the FDI-growth nexus: the Malaysian experience," Applied Economics, Taylor and Francis Journals, vol. 41(13), pages 1595-1601
Jenkins, Carolyn and Lynne Thomas (2002:42), “Foreign Direct Investment in Southern Africa: Determinants, Characteristics and Implications for Economic Growth and Poverty Alleviation”, Final Report, October, Globalization and Poverty Project, Centre for the Study of African Economies, University of Oxford
King RG, Levine R (1993b:1153) Finance, entrepreneurship, and growth: theory and evidence, Journal of Monetary Economics, 32:513–542
Kawai, H., (1994:72). “International Comparative Analysis of Economic Growth: Trade Liberalization and Productivity”, Developing Economies 32, pp. 372-397.
Kaufmann, D., Kraay, A., Mastruzzi, M., (2005:775). Governance Matters IV: governance indicators for 1996–2004.World Bank Policy Research Working Paper, vol. 3630. World Bank, Washington, D.C
Kyung So Im, M. Hashem Pesaran, Yongcheol Shin, Testing for Unit Roots in Heterogeneous Panels. Journal of Econometrics, 2003, 115, 53-74. Earlier version available as unpublished Working Paper, Dept. of Applied Economics, University of Cambridge, Dec 1997, (http://www.econ.cam.ac.uk/faculty/pesaran/lm.pdf)
Larrain G, Reisen H, Maltzan J. (1997:122). Emerging market risk and sovereign credit ratings, OCED development Centre Technical Paper No. 124
Levin, Andrew, Lin, Chien-Fu and Chia-Shang James Chu,(2002:1967) Unit Root Tests in Panel Data: Asymptotic and Finite Sample Properties. Journal of Econometrics
Marcella alsan, David e. bloom and David canning,(2006:42) The Effect of Population Health on Foreign Direct Investment Inflows to Low- and Middle-Income Countries World Development Vol. 34, No. 4, pp. 613–630, 2006
McKinnon RI (1973). Money and capital in economic development, Brookings Institution, Washington, D.C
Nair-Reichert, Usha & Weinhold, Diana,( 2001:178). " Causality Tests for Cross-Country Panels: A New Look at FDI and Economic Growth in Developing Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(2), pages 153-71
Noorbakhsh, F., Paloni, A., & Youssef, A. (2001:200). Human capital and FDI inflows to developing countries: New empirical evidence. World Development, 29(9), 1593–1610.
Omran M. & Bolbol A. (2003:10). Foreign Direct Investment, Financial Development, and Economic Growth: Evidence from the Arab Countries Review of Middle East Economics and Finance, Vol. 1, No. 3, pp. 231-249
Patrick Honohan, 2004. "Financial development, growth, and poverty: how close are the links? Policy Research Working Paper Series 3203, World Bank
Ravallion, Martin & Shaohua Chen, (1996:541). "What can new survey data tell us about recent changes in distribution and poverty?," Policy Research Working Paper Series 1694, The World Bank
Rappaport, J.,( 2000:27). How Does Openness to Capital Flow Affect Growth?, Mimeo, Federal Reserve Bank of Kansas City
Rebecca M. Neumann, a, , Ron Penla and Altin Tankua (2009:7) . Volatility 27of capital flows and financial liberalization: Do specific flows respond differently? International Review of Economics & Finance Volume 18, Issue 3, June 2009, Pages 488-501
Robert Hoffmann & Chew-Ging Lee & Bala Ramasamy & Matthew Yeung, (2005:19). "FDI and pollution: a granger causality test using panel data," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(3), pages 311-317.
Roemer, Michael, and Mary Kay Gugerty (1997:118), "Does Economic Growth Reduce Poverty", CAER I Discussion Paper No. 5, Cambridge, MA: Harvard Institute for International Development.
Singh,Harinder,and Kwang W.(1995:172). Some New Evidence on Determinants of Foreign Direct Investment in Developing, Policy Research Working Paper WPS 1531, Washington, World Bank
Shaw ES (1973), Financial deepening in economic development. Oxford University Press, New York
Tybout, James (2000:677), “Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?, Journal of Economic Literature.38(1).
Wheeler, David & Mody, Ashoka, (1992: ). "International investment location decisions: The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76
Wurgler, Jeffrey, (2000). "Financial markets and the allocation of capital," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 187-214
Zhang, K., and Markusen, J. (1999:163). Vertical multinationals and host-country characteristics, Journal of Development Economics
Abdel Aal Mahmoud, Ashraf
FDI, local Financial Markets, employment and poverty alleviation. (deposited 04. Jul 2010 17:50)
- Abdelaal Mahmoud, Ashraf FDI, local Financial Markets, Employment and poverty alleviation. (deposited 25. Apr 2011 23:35) [Currently Displayed]