FDI, Local Financial Markets, Employment and Poverty Alleviation

37 Pages Posted: 13 Jul 2010 Last revised: 20 Oct 2014

See all articles by Ashraf Abdelaal Mahmoud

Ashraf Abdelaal Mahmoud

University of Rome Tor Vergata - Faculty of Economics; George Washington University - School of Business

Date Written: March 18, 2010

Abstract

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 important. FDI inflows vary across international borders and conditioned 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 regularly to be a key source of employment and has a favorable effect on economic growth of low income countries if interacted with monetary and nonmonetary variables.

Keywords: FDI, Financial Market, Poverty, Employment

JEL Classification: F23, F36, F43, E24, I32, O16

Suggested Citation

Mahmoud, Ashraf Abdelaal, FDI, Local Financial Markets, Employment and Poverty Alleviation (March 18, 2010). Available at SSRN: https://ssrn.com/abstract=1638792 or http://dx.doi.org/10.2139/ssrn.1638792

Ashraf Abdelaal Mahmoud (Contact Author)

University of Rome Tor Vergata - Faculty of Economics

Via Columbia n.2
Rome, rome 00100
Italy

George Washington University - School of Business ( email )

Washington, DC 20052
United States

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