The Impact of Foreign Direct Investment on Poverty Reduction in Turkey: A Time Series Analysis

Abstract

Foreign direct investment can be outlined as the net inflows of investment to take possession of permanent management. Foreign direct investments can support poverty alleviation especially for developing countries which needs capital. Global foreign direct investment sums $1.5 trillion in 2019 decreased to a calculated $859 billion in 2020 as the UNCTAD report indicates. Foreign direct investment flows are expected to remain weak with uncertainty due to Covid-19. For almost 25 years, extreme poverty, was steadily declining, on the contrary, expected to rise in 2020 between 88 million and 115 million added as the disruption of the Covid-19 on the global supply chain due to lockdowns.
 Time series analysis of foreign direct investments and poverty reduction relationship for Turkey between the 1996-2019 period confirms that foreign direct investment net infows reduce poverty: %1 increase of FDI inflow to Turkey increases % 0.011 of household final consumption which used as proxy for poverty. Turkish policymakers should develop an appropriate economic environment to appeal as much as foreign direct investment to Turkey.

Inequality and the impact of growth on poverty in sub‐Saharan Africa: A GMM estimator in a dynamic panel threshold model

“…It should be noted, according to the results of our estimates, that there is no significant impact between FDI and domestic investment GCF on extreme poverty in both regimes. Our findings regarding the relationship between FDI and poverty reduction are in opposition to those obtained by Tsaurai (2023), Algan et al (2021), Topalli et al (2021), Ahmad et al (2019), Ngo (2019), Tsaurai (2018), Fowowe andShuaibu (2014), andJalilian andWeiss (2002), who showed that FDI contributes positively and significantly to poverty reduction. Also, our results are not consistent with those obtained by Bornschier and Chase-Dunn (1985), who found that FDI exacerbates poverty.…”

Does foreign direct investment affect poverty in BRICS?

“…The study noted that FDI reduced poverty, especially unemployment, but not in areas linked to the production sector capacity. Algan et al (2021) investigated the linkage between poverty and FDI in Turkey using time series data from 1996 to 2019. Household consumption expenditure was used as a proxy measure, and FDI was found to reduce poverty.…”

“…However, Bornschier and Chase-Dunn (1985) argued that FDI reliance is not good for long-term growth and poverty reduction. Empirical research exists to support the notion that FDI triggers poverty reduction (Algan, Bal, & Bayraktar, 2021;Jalilian & Weiss, 2002;Topalli, Papavangjeli, Ivanaj, & Ferra, 2021;Ucal, 2014).…”

“…Five groups emerge on this front. First, FDI alleviates poverty (Algan et al, 2021;Jalilian & Weiss, 2002;Topalli Asian Economic and Financial Review et al, 2021;Ucal, 2014); second, FDI exacerbates poverty (Bornschier & Chase-Dunn, 1985); third, there is no relationship between the two variables (Arogundade et al, 2022;Chinyere, Christian, Ogbonna, & Igwe, 2021;Dhingra & Jain, 2021;Magombeyi & Odhiambo, 2017a); fourth, a bi-directional causality exists between FDI and poverty reduction (Arogundade et al, 2022); and fifth, FDI triggers the reduction of poverty only under certain conditions (absorption capacities) in the host nation (Arogundade et al, 2022;Dada & Akinlo, 2021;Fauzel, Seetanah, & Sannassee, 2016;Hanim, 2021;Quinonez, Saenz, & Solorzano, 2018). These mixed results, divergent views and conflicting findings motivated this investigation of FDI-led poverty alleviation to contribute to the existing literature.…”

Do Investments Have an Impact on Reducing Poverty? ARDL Approach

“…This situation has led to a limited number of empirical studies in the field of economics in Türkiye that use time series analyses related to poverty. This constraint has been overcome in the literature by using per capita household final consumption expenditures (HFC) as a proxy variable (Şahbaz et al, 2016;Usman, 2018;Algan et al, 2021;Sikandar et al, 2021;Sürücü et al, 2021;Ersoy & Karşıyakalı, 2022;Olaniyi & Odhiambo, 2024) for poverty. Therefore, in this study, per capita household final consumption expenditures were used for the poverty indicator, which is the dependent variable.…”