Foreign Direct Investment and Poverty Reduction

Abstract

It is widely proclaimed that capital account liberalization would immensely benefit developing economies because once capital controls are lifted, developing economies create a potential for movement of capital. And, this free movement of capital could possibly increase growth thereby lifting millions out of poverty. India has been gradually liberalizing since the 1980s and throughout more capital inflows were observed compared to outflows. Also, the composition of capital flows has been changing since the 1980s–with Foreign Direct Investment (FDI) inflows rising steadily post-1991compared to portfolio and debt flows. However, since 2000, FDI outflows from India were also witnessed. In this paper we empirically test the impact of FDI flows on poverty in India for 1980–2011. To provide a correct perspective to India’s performance we also analyze the link between FDI flows and poverty for SAARC countries. For a better understanding of how FDI flows impact poverty, we analyze the outflows and inflows separately. The results show both similarities and contrasts in the behaviour of India in comparison with the other SAARC countries.

FDI and Welfare Dynamics in Africa

“…While Lehnert, Benmamoun, and Zhao (); Gohou and Soumare (); Dollar and Kraay (); and Klein et al () support the poverty reduction hypothesis, Kosack and Tobin () dismiss the poverty reduction hypothesis and argue that FDI lowers the rate of human development in most less‐developed economies. Similarly, Agarwal and Atri () tested an FDI poverty reduction hypothesis in India and other South Asian Association for Regional Cooperation (SAARC) countries by using both FDI inflows and outflows. They employed two poverty indicators, namely, a head count ratio and poverty gap index.…”

“…It is imperative to note that poverty is a multidimensional phenomenon. However, the framework in current literature is dominated by one‐dimensional or monetary measures (Agarwal & Atri, ; Alfaro, ; Almfraji, Almsafir, & Yao, ; Blomstrom, Lipsey, & Zejan, ; Borensztein, de Gregoria, & Lee, ; De Mello, ; Shamim, Azeem, & Naqvi, ; Ucal, ; Whalley & Weisbrod, ). A one‐dimensional measure of economic development does not reflect the equity attributes of the economy and may neglect the key aspects of societal welfare.…”

How responsive is the poverty to the foreign direct investment inflows in Nigeria? Evidence from linear and non-linear ARDL

“…The past research that found the impact of FDI to reduce poverty significantly (see, Khan et al, 2019;Agarwal et al, 2017;Shamim et al, 2014;Jalilian and Weiss, 2002;Fowowe and Shuaibu, 2014;Zaman et al, 2012;Baradwaj, 2014;Gohou and Soumare, 2012). However, some other studies found that FDI impacted negatively on poverty alleviation are (Dhrifi et al, 2020;Ali et al, 2010;Huang et al, 2010).…”

“…It means the critical macro-economic variable of the country is not effectively implemented. Agarwal et al (2017) conducted an empirical study by comparing FDI and poverty in India between 1981 and2011. The ARDL approach shows that FDI has a negative impact on the poverty level in India.…”

Be Nice to Thy Neighbours: Spatial Impact of Foreign Direct Investment on Poverty in Africa

“…The choice of period and countries (see appendix 1) were dictated on the availability of data. In this study's analysis, we follow Gnangnon (2020), Agarwal et al (2017), and Perera and Lee (2013) by using headcount ratio, which is a measure of the incidence of poverty and poverty gap index, which measures the intensity of poverty. Both headcount and poverty gap indexes are measured using the international poverty line of $1.90 per day.…”